Retirement confidence at an all-time low

According to the recent report from Nucleus, retirement confidence in the UK has fallen significantly over the last six months, from 6.9 in August 2023, to 4.4 in March 2024. Whilst inflation is now down to the Bank of England’s 2% target, we are still very much in a cost-of-living crisis, and with world politics dominating the headlines, there remains a lot of uncertainty ahead.

Nucleus has been tracking retirement confidence amongst UK adults by asking “how confident are you that you’ll have enough money to live comfortably for the rest of your life?” Respondents are asked to give a score out of 10, with 0 being ‘not at all confident’, and 10 being ‘totally confident’.

Confidence has been analysed across different demographics such as age, gender, employment status and many more, but one of the key takeaways is consistent throughout the results: the importance of having a plan to provide confidence. We would strongly agree with this!

Key findings

So, what’s driving the downward trend? The Nucleus report highlights a number of key challenges:

Affordability – we are still in a cost-of-living crisis with wage growth lagging behind inflation and high mortgage rates. Pension and savings contributions are often last on the list of priorities for many at the moment, which will undoubtably have a knock-on effect on people’s ability to retire in comfort.

Lack of trust – there have been multiple changes, some highly significant, to pension policy over the last 20 years. This has resulted in people having a lack of faith in the long-term continuity of the pension system. People want stability and simplicity with their financial arrangements. Constant political tinkering makes people less inclined to save for their future.

The future of the state pension – A whopping 71% of UK adults believe the state pension will not exist or will be less generous when they retire. The state pension is a key source of income for existing pensioners, but with rising state pension ages, and an ageing population plus the ‘triple lock’ indexation policy expected to add pressures on public finances in the future, pessimism and uncertainty around the future of state pensions is understandable.

Lack of personal planning – there are many reasons why people avoid planning for their retirement, such as ill-health, a lack of education and awareness, and believing it’s too far away to even think about. Whatever the reason, a lack of planning, or just starting too late, can have serious consequences for your retirement.

The three words most individuals associate with retirement confidence are: security, knowledge, and trust. Clearly, a lot of people are not feeling good about any of these at the moment, so what can be done?

Future proofing retirement

In Nucleus’ 2023 report, 51% of respondents had a detailed plan for retirement, and these individuals had a considerably higher level of confidence in their retirement prospects.

It is obvious to say that saving more into pensions will improve retirement confidence, but this is only one part of the puzzle. In order to save, you need goals; what are you saving for and how much do you need to achieve this?

Most people don’t know or have never thought about what retirement will look like for them. A good financial plan will look beyond the numbers of what income you feel you need in retirement and explore the deeper motivations and goals behind your retirement plans.

What is most important to you and what makes you happy are both good questions to ask yourself to help visualise your future. Knowing your goals and how you want to live your life will help motivate you to start taking practical financial steps towards achieving the future you want. And the prize? Financial confidence, a feeling of being in control, and peace of mind about your future retirement.

If you would like to discuss any of the above or start to make a plan for retirement with Carbon, please do not hesitate to contact one of our financial planners on 0131 220 0000 or enquiries@carbonfinancial.co.uk.

by Polly Milne, Financial Planner