Brits aged 35-54 are facing several barriers when it comes to saving for retirement, joint research by Invesco, Maslansky and Partners, and Nest Insight has revealed.
This is because they are too young to have benefitted from defined benefit (DB) pensions, but are likely to be saving via auto-enrolment, even though this may have happened mid-career.
As a result, they are part of what Invesco called a “squeezed generation” when it comes to how much they have managed to put aside for when they stop working.
But there is still time to make sure they can catch up, despite nearly half (46%) being unaware of how much income their scheme will provide in retirement.
Invesco’s research showed three main barriers the age group faces when saving for later life.
- Half of people said they cannot afford to contribute more to their pension at the moment, as 35% said they have more pressing financial priorities;
- Around 40% found retirement planning to be “too overwhelming”, with 33% stating that the covid crisis has made them less confident about their ability to plan for the future;
- Just 20% felt they were on track with their retirement planning. This is because more than one in three (35%) don’t know what they can do to better prepare for life after work; 20% don’t know here they can find information about their pension pots; only 38% are aware of online pension calculation tools; and just 5% spoke to a free government pension advice service or financial adviser.
Such limitations could “create a sense of defeatism that can put them off taking the first step to improving their retirement income”, Invesco said.
But the feeling of defeat can evolve into regret, as many among the 45-54 year-olds wish they had started planning earlier.
Targeted communication
Jo Phillips, director of research and innovation at Nest Insight, said: “People in their late 30s, 40s and early 50s are at a life stage when retirement is perhaps starting to come into focus. Yet, despite the efforts by pension providers to deliver messages and tools designed to encourage retirement planning, many people in this age group are not engaging with their pension savings.
“Through this research, we’ve explored whether alternative choices of language and message framing might help motivate people to take the first steps towards being in control of their retirement income, and make existing tools and support more effective. Overwhelmingly, we found that communications that meet people where they are, with empathy and reassurance, and make retirement planning feel manageable, can give them the boost they need to engage for the first time.”
Stephen Messenger, head of UK strategic institutions at Invesco, added: “It’s widely recognised that effective communication is one of the largest barriers defined contribution (DC) practitioners face in engaging with their members.
“This study re-emphasises and highlights that the same communication targeted at people within different stages of their retirement planning can quite easily be tilted to become much more effective. The framework and method of communication outlined in this report is one which we strongly believe can be successfully applied to any DC scheme communication in a practical and easy to understand way.”
Philips continued: “Whilst we know that the actions people say they will take do not always happen in reality, the level of change in people’s stated intentions after seeing the optimised messages was quite striking.
“These results give us reason to believe that communications using these foundational messages can help drive a positive change in the number of mid-working-life savers planning and preparing for retirement and help more people to achieve financial security in later life.”
