Over half of UK working adults (57%) are saving for retirement outside of their pension, new research from interactive investor has revealed.
They are using vehicles such as cash savings, stocks and shares ISAs, buy-to-let properties and other investments to build their long-term wealth.
However, Interactive investor said its research showed a “striking” over-reliance on low-yielding cash savings to fund long-term goals.
People are more than twice as likely to save for their retirement in cash (43%) than in a stocks and shares ISA (21%).
Camilla Esmund, senior manager at interactive investor, said: “The pension landscape has been firmly in the spotlight over the past year, especially in the months leading up to last month’s hotly-anticipated Autumn Budget.
“Speculated reforms to the retirement landscape raised concerns over the future of pensions, potentially undermining them as an important tool for long-term financial resilience. But this isn’t a recent phenomenon.
“It’s clear from our research that the constant tinkering of the pension rules is harming public trust in pensions, disincentivising retirement saving, and risks widening the glaring pension engagement gap we have in the UK. Without urgent action to support savers, millions may reach later life without enough money to live comfortably.”
Esmund said it was concerning that so many people are opting to save in cash for retirement, warning that interest historically lags behind investment growth.
She explained: “While it makes sense to have an adequate cash buffer, people risk missing out on years of investment compounding and could materially damage their retirement prospects.”
Esmund said a stocks and shares ISA can be a better alternative, offering liquidity, while the benefit of tax-free treatment of ISA withdrawals can help retirement income go further.
“A number of investors might be looking to consolidate their investments, too; housing multiple investments under one roof, on one platform. There are obvious benefits here when it comes to flexibility and control, as investors can monitor all their investments in one place, whether that’s their ISA or personal pension or both, helping them to plan more effectively,” she added.
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