Pension Awareness Day: Savers still in the dark amid Covid-19 downfall

Over-50s lose £5.3bn from their pension pots during pandemic

New research from Legal & General Retail Retirement has estimated that roughly 10 per cent of pre-retired people over the age of 50 (1.4m) are saving less every month when compared with before the pandemic. At present, individuals who are saving less have reduced their contributions by £155 a month. However, at the peak of the pandemic this figure stood at an average of £219 a month, L&G stated. Overall, those aged over 55 saving less towards retirement will have contributed £3,283 less on average during the course of the pandemic than they otherwise would have. Survey respondents pointed out a variety of reasons for this downfall, such as pay decreases (39 per cent), redundancies or job losses (22 per cent), and the impact of being furloughed (13 per cent). One in five (20 per cent) of people aged above 50 also had to reduce their retirement contributions in order to provide more monetary support to their loved ones, L&G added. 

Retirement security in the UK declines for the fourth consecutive year 

The retirement outlook in the UK has declined for the fourth successive year, as the economic disruption resulting from the pandemic continues to weaken retirement security, according to the Natixis Global Retirement Index. The ranking, in its ninth edition, showed that the UK has fallen one place to 18 out of the 44 nations included in the index, with its overall country score remaining at 72 per cent. The lower ranking is a result of declines in three sub-indices such as quality of life, health and finances in retirement, where the UK was ranked seventh, 18th and 29th, respectively. However, despite a lower overall ranking, the UK has multiple top 10 indicators, with water and sanitation ranking first, biodiversity ranking fourth, and air quality ranking 10th. Furthermore, it was also noted that many pension schemes are shifting from defined benefit to defined contribution schemes, with eight in 10 individuals surveyed in June being aware that this shift increasingly puts the responsibility on the individual to fund their retirement. As a result of the transition to DC, the vast majority (80 per cent) said they would be more inclined to work for a company that offered matching pension contributions. They also believe the investments offered in their plan can play a role in spurring retirement savings, as seven in 10 say having access to investments that reflect their personal values would motivate them to save more for retirement.

PLSA launches new guide for member communication 

The Pensions and Lifetime Savings Association has published new guidance to help pension schemes and employers support savers’ financial wellbeing by starting a conversation about their workplace pension. Launched to coincide with Pension Awareness Day, the guide is designed to encourage employers to educate their workforce about how their pension scheme works, how they can make the most of employer contributions, and how they can make good decisions to set them up for a more secure future, the industry body said. With more employers offering workplace pensions through auto-enrolment, and people now having more choice about how to invest and access their pension, the need for pensions awareness has never been greater, the PLSA stated. The industry body noted that in many cases, employers and schemes want to provide this support but are unsure what information they can give without falling within regulations that govern personal financial advice. The guide describes the regulatory context surrounding the advice/guidance boundary and provides practical examples of conversations that would and would not fall within the realms of regulated advice. It also dispels five common myths and assumptions that might be barriers to some employers and schemes providing more support for savers, and features case studies derived from among the PLSA’s membership that show what is possible for schemes and employers to do, it noted.

Young adults struggle to plan effectively for retirement 

Despite having a financial goal defined for retirement, young adults are struggling to plan effectively, according to new research from Moneybox. Young adults aged between 20 and 40 ideally want to retire at age 59 with an income of £26,000 a year, covering all income sources such as state, employer, personal pensions, savings and investment accounts, it found. Of the 2,000 young adults surveyed by the saving and investing app, while 75 per cent of young adults surveyed said that they have already taken some steps to save and invest for their long-term future, when asked about these decisions, the results revealed there is much work yet to be done to help young adults effectively plan for life after work. The Moneybox research showed that only 41 per cent believe they are currently contributing to a workplace pension, and only 11 per cent know that they are benefiting from having maxed out employer contributions to their workplace pension.