Retirement Planning - UK - January 2019

OVERVIEW
EXECUTIVE SUMMARY
The market
Length of average retirement set to continue rising
Figure 1: Expectation of life for those aged 65 in each year, period principal projection, by gender, UK, 1981-2066
Over 41 million UK adults now have a workplace pension
Figure 2: Number of employees with workplace pensions, by pension type, 2009-17
The consumer
62% of non-retired adults own a pension
Figure 3: Pension product ownership, October 2018
Most foresee drawing on non-pension sources of funding in retirement
Figure 4: Other savings and investment products held for retirement, October 2018
Just two in five have taken any steps to plan for retirement
Figure 5: Retirement planning steps taken, October 2018
Few currently interested in new retirement planning technologies
Figure 6: Retirement planning tools and services most likely to consider, October 2018
Majority are open to working beyond state pension age
Figure 7: Attitudes towards retirement and retirement planning, October 2018
Situational limitations and conflicting priorities main barriers to retirement planning
Figure 8: Barriers to retirement planning, October 2018
What we think
ISSUES AND INSIGHTS
Millennials’ views about retirement indicate rising demand for flexible solutions
The facts
The implications
Resistance to new technologies preventing greater engagement in retirement planning
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Ongoing improvements in longevity have altered retirement planning
Over 41 million now have a workplace pension thanks to auto-enrolment
The SIPP market has grown significantly in recent years
Most currently going into drawdown at retirement
Proportion working beyond retirement age on the rise
Recent government initiatives have struggled to provide support
RETIREMENT PLANNING ENVIRONMENT
The average length of time in retirement set to keep rising
Figure 9: Expectation of life for those aged 65 in each year, period principal projection, by gender, UK, 1981-2066
Improving longevity is putting increased pressure on state finances
Figure 10: UK population, by age band, and dependency ratios, 2016-86 (Based on 2016 projections)
State pension age eligibility being progressively pushed back
Figure 11: Projected dates for full transitions to increase in state pension ages, by gender
RETIREMENT FUNDING OPTIONS
41 million employees have a workplace pension
Figure 12: Number of employees with workplace pensions, by pension type, 2009-17
DC pensions require savers to be more switched on
Figure 13: Proportion of employee jobs with workplace pensions, by type of pension, 2017
Figure 14: Proportion of employees with workplace pensions, by age band and type of pension, 2017
ABI data reports falling new individual pension business
Figure 15: Number of new individual personal and stakeholder pensions, 2012-17
Regulated SIPP sales volumes nearly reached 1 million in 2017
Figure 16: Number of regulated SIPP, personal pension and stakeholder pension sales, 2013-17
Lifetime ISA offers savers a new pension-like alternative
Figure 17: Number of ISAs and amounts subscribed, by component type, 2011/12-2017/18
Drawdown now the default option for many at retirement
Figure 18: Volume of new annuity and income drawdown sales, 2013-17
More people expected to work past 65
Figure 19: Employment rate among people aged 65+, Q1 2011-Q3 2018
Equity release is increasingly popular to fill gaps in retirement funding
Figure 20: Sales of equity release products, by volume and value, 2011-17
Buy-to-let property has become a less attractive savings alternative
Figure 21: New buy-to-let mortgages, by purpose of loan, not seasonally adjusted, 2012-17
REGULATORY AND LEGISLATIVE CHANGES
Pensions dashboard set to be launched in 2019
Single Financial Guidance Body to go into service from January 2019
Annuity customers must be made aware of best available market rates
Government initiatives to boost the use of pension advice have flopped
THE CONSUMER – WHAT YOU NEED TO KNOW
62% of non-retired adults own a pension
Most envision drawing on non-pension sources of funding in retirement
Few are actively planning for their retirement
Millennials have distinct views about retirement
Situational limitations and other priorities key barriers to engagement
PENSION PRODUCT OWNERSHIP
Four in five full-time employees have a pension
Figure 22: Pension product ownership, October 2018
Fewer than half of Younger Millennials own a pension
Figure 23: Pension product ownership, by generation, October 2018
Lower earners least likely to have a pension
Figure 24: Pension product ownership, by gross annual household income, October 2018
OTHER PRODUCTS AND PLANS FOR RETIREMENT
Half plan to use cash savings to help fund their retirement
Figure 25: Other savings and investment products held for retirement, October 2018
Under-35s most likely to plan on using cash
Figure 26: Other savings and investment products held for retirement, by age, October 2018
Over the long run, returns on cash savings liable to disappoint
Pension owners more likely to be engaged in retirement planning
Figure 27: Other savings and investment products held for retirement, by pension ownership, October 2018
60% plan to use a non-financial services-related resource in retirement
Figure 28: Other retirement funding plans, October 2018
RETIREMENT PLANNING ACTIVITY
Most non-retired adults have not done any retirement planning
Figure 29: Retirement planning steps taken, October 2018
Just 28% are regularly saving for retirement
Figure 30: Retirement saving activity, October 2018
Pension ownership boosts activity
Figure 31: Retirement planning steps taken, by pension ownership, October 2018
Women lag behind men in retirement planning activity
The quality of engagement needs improvement
INTEREST IN RETIREMENT PLANNING SERVICES
Interest in new retirement planning technologies is lacking…
Figure 32: Retirement planning tools and services most likely to consider, October 2018
…but is notably higher among pension owners and younger generations
Figure 33: Retirement planning tools and services most likely to consider, by generation, October 2018
ATTITUDES TOWARDS RETIREMENT AND RETIREMENT PLANNING
Most are prepared to consider working beyond state pension age
Figure 34: Attitudes towards retirement and retirement planning, October 2018
Working into retirement a less daunting prospect for the affluent
Figure 35: Agreement with selected statements about retirement and retirement planning, by socio-economic group, October 2018
Millennials’ views can vary greatly from other generations’
Figure 36: Agreement with selected statements about retirement and retirement planning, by generation, October 2018
Pension scams threaten to put younger people off using pensions
BARRIERS TO RETIREMENT PLANNING
77% identify a specific barrier to engagement in retirement planning
Figure 37: Barriers to retirement planning, October 2018
For most, just one or two things are getting in the way
Figure 38: Number of barriers to retirement planning, October 2018
Figure 39: Barriers to retirement planning, by number of barriers to retirement planning, October 2018
35% of Millennials identify three or more barriers
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology