Most UK employees are not saving enough for retirement, according to new research by professional services company, Towers Watson. Its Global Benefits Attitudes Survey, which took in responses from more than 2,000 British employees, shows that 53% of workers feel they need to save much more for their retirement, while 78% are concerned about whether they are saving as much money as they should.
As such, 58% of employees are uncertain of being able to afford a retirement of around 25 years based on their current savings, and almost one in four (23%) expect to work up to age 70 or above – a 10% increase on the company’s 2010 survey. Employees expect to use that extension of the working age to make up for any savings shortfalls.
A previous Towers Watson report released in February showed that managing an ageing workforce is poised to become one of the top three concerns for British companies. The expectation that more workers will be in their 70s means that almost half (43%) of bosses expect greater demand for benefits, and more than a third (35%) expect an increase in flexible working. Furthermore, 43% of employers believe that they must prepare for more staff members to demand healthcare and retirement provisions.
In other findings, the pressure on households to put aside some money for the future while paying off existing bills and debts has intensified in recent years, with the result that just a third (36%) of employees feel confident that they will enjoy a better retirement than their parents. The management of daily costs – such as travel and food – are still outlined as the top priority by the majority of employees (57%), but 34% of workers were more concerned about meeting their retirement costs. Unsurprisingly, in the light of these factors, more than half of UK workers (52%) have simplified their lifestyles and cut back on spending in recent years.
Towers Watson head of UK pensions John Ball said: “Many workers recognise the need to save more, but their ability to do so seems constrained. Our research highlights that retirement security is becoming an increasingly important issue for most employees – especially those approaching retirement.
He added: “While individuals need to manage their own financial wellbeing, most employees (71%) rely on their employer’s pension plan as their primary way to save for their retirement. And we know from our research into the challenges of an ageing workforce that 61% of employers are concerned about the reputational risk of workers reaching old age and not being able to retire. Employers do believe they have a role in enabling their staff to retire – but that’s not quite the same thing as ensuring their staff will be able to.”
Interestingly, many households are using web-based services and mobile apps to help them organise their funds. Around one in seven (14%) of employees said they regularly use mobile apps or websites to track their retirement savings, while nearly one in six (15%) use them for guidance on improving their financial situation.
Ball thinks that this is a positive development. “It’s great to see employees recognise that there are tools available to help them plan ahead,” he said. “In his 2014 Budget, the Chancellor announced new requirements for employers to provide free and impartial, face-to-face guidance for all defined contributions (DC) retirees. While many large companies already provide some at-retirement help, the best value to pension scheme members will be if the guidance helps them take a complete view of their retirement income planning.”