Would-be pension savers squeezed by other financial demands

Added 5th September 2016

Fewer than a fifth (17%) of UK advisers think that clients who feel squeezed keeping up with bills and repayments would put any extra money towards their pension savings, research from Royal London has found.

Would-be pension savers squeezed by other financial demands

The UK survey of more than 150 financial advisers found that 45% of clients were actively involved with saving for retirement but are struggling to save more.

The findings mirror an earlier Royal London survey of nearly 2,500 people aged 35-44, which found that a third said their finances felt squeezed and they were struggling to make day-to-day expenses.

Feeling the squeeze

Fiona Tait, pensions specialist at Royal London, said: “While our findings show that many people are ‘Feeling the Squeeze’, it is good news that advisers think their clients are engaged with retirement savings. Even if people can’t afford to save more now, it is possible to create a definite plan of action to save more in the future when their income increases or outgoings are reduced. 

“For many the level of saving into pensions is well below the level it should be for them to achieve a realistic income for the lifestyle they imagine when they choose to retire. 35-44 year olds are particularly vulnerable, as they are less likely to have a DB pension to fall back on.

“Financial advisers can help their clients by identifying future opportunities to save more and, importantly, getting them to commit to taking action when these opportunities occur.”

Savings MOTs

The Royal London ‘Feeling the Squeeze’ research identified a number of Savings Moments of Truth (MOTs) where money no longer needed for other expenses could be redirected into pension savings.

The examples of potential savings opportunities show that it is possible to boost the income someone is able to secure in their retirement, if they accept that they need to take action to address their long term savings.

  • Finances: Those with finance commitments are paying an average of £200-£299 a month and will see this commitment end in the next two-to-three years. If they contributed half of this amount, £100 ($133, €119), into a pension until they decided to retire, they could add nearly £40,000 to their pension pot.
  • Personal loans and credit card debt: Those with long term personal borrowings, either as a loan or on credit cards expect to pay these off within the next three-to-four years on average. Redirecting half their monthly payment of £100-£199 after the debt is repaid could create an additional £18,600 in pension savings.
  • Mortgages: On average, those surveyed expect their mortgage to be paid off within the next 15-20 years. This could free up around five years of payments, which on average are £500-£599 per month, securing a potential boost to their pension pot of over £20,000.

Opportunity

Tait said: “These reviews are a great opportunity to reassess a client’s current pension savings and set in place those Savings MOTs to potentially boost their future income in retirement over the long term.”

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About Author

Kirsten Hastings

Senior Reporter

Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

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