89% of the UK do not consider saving for retirement


April 2015

89% of the UK do not consider saving for retirement

  •     89% of the UK population are not saving for their retirement as a priority
  •     29% ñ equivalent to 14.6 million people ñ are currently failing to save any money at all
  •     Prioritising a holiday (23%) is twice as popular as saving for retirement (11%)
  •     Annual index launched in response to a Budget steered towards savings 
  •     ONS reveals the savings ratio dropped 0.1% to 5.8% from the third to the fourth quarter of 2014

UK consumers are steadily progressing into a national savings and retirement crisis, according to nationally representative research from Avacade Future Solutions.  The data reveals 89% of the population do not consider saving for their old-age as important; with more than 50% rather saving towards a holiday, or not at all. In the wake of the 2015 budget, announcements to kick-start the nationís saving funds were the top priority on the fiscal agenda. The motivation behind a flurry of policy-backed pre-election announcements frames a bleak outlook for tomorrowís retirees. Mismanaged finances and a distinct lack of knowledge has added grave momentum to an already weakened fiscal future, with one-tenth of pension planers saying they believed they would never fully be able to retire.

Utilising nationally representative research of more than 2,000 respondents, Avacade Future Solutions (AFS) today launches the UK Saversí Index. The research underlines the motivations behind Britainís savings profile, and the financial objectives that assume priority status for UK savers. Weighted by the overriding fact that 14.6 million adults ñequivalent to 29% of the nation - are not saving at all, the research reveals a worrying truth for households across the country. Of those from the sample that are saving, twice as many are prioritising a holiday - a single trip - than are preparing for retirement. With the average UK household expected to owe almost £10,000 by 2016, the reasons behind Britainís poor savings performance are rife. Since the economic downturn, savers have struggled to beat inflation, intensifying the challenge of funding a satisfactory retirement. Furthermore, in a recent HSBC study of the UKís sentiments towards retirement, 52 per cent said their savings were not keeping pace with the rising cost of living, with one-third considering their mortgage as a key barrier to saving.     

The research has also unveiled some interesting gender-based, age-based and regional differences between savings rates. Men and women possess different financial objectives with 12% of men prioritising their retirement, compared to only 9% of women. Instead, the female respondents prioritised saving for their children and for a new home. Young people are the most proactive age group towards savings, with 74% of 18 ñ 34 year olds putting money away. This drops to 69% for 35 ñ 55 year olds and 70% for those aged 55 plus. These findings are supported by the Unprepared Britain report that found todayís 30-34 year olds made their first pension payment 20 years earlier than those who are now retired (65+). 

There is a significant divergence between the saving rates across the UK. In the East of England, 35% of the population are not saving at all compared to 23% in London and 24% in Northern Ireland. As a region, Northern Ireland is the most pension-conscious with one in five (20%) prioritising their retirement. Scotland and the East Midlands score 14% in joint 2nd place. 

As announced by the Office for National Statistics, the UKís GDP per head remains 1.2% below pre-economic downturn levels, with net national disposable income remaining 5.1% below pre-downturn levels. In short, Britain is experiencing the slowest recovery in a century, with households dipping into savings to fuel spending, spurring the savings ratio to drop to 5.8% in the fourth quarter from 5.9% in the third quarter. As part of a global comparison, personal savings in the United Kingdom is considerably lower than its global counter-parts, compared with 13% across the Eurozone, 21% in Japan and 10% in Germany. The launch of todayís research underscores a pensions crisis that is no-longer looming but in fact, very much in the present. As expected, pre-election policies have presented a raft of initiatives designed to catalyse a nation of savers. However, consumers are tackling burgeoning household debt, interest rates at an all-time low, and an overall consumer perception that saving is an immediate luxury as opposed to a long-term necessity.

Lee Lummis, Managing Director, Avacade Future Solutions, said: ìTaking a proactive approach to saving is vital for effectively achieving oneís financial objectives, especially retirement planning. The fact that 89% of the UK population are not prioritising their pension and that 14 million people in the UK are not saving at all calls for immediate industry action to prevent what could be the poorest generation of retirees in our lifetime. The Budget and the pension reforms that were announced in 2014/early 2015 have provided a valuable impetus to savers and pension planners, but education and support is now needed so that appropriate financial planning can happen. We believe the rest of the industry needs to recognise the number of people who are not saving and ensure they are given the tools to make effective financial decisions.î