Separate research from Barnett Waddingham and Aviva show how pension savers are growing increasingly concerned about the impact of the cost of living crisis on their pension pot.
New research from Barnett Waddingham revealed that two in five defined benefit (DB) pension scheme members (39%) are worried they won’t have enough money to see them through retirement. This figure increases to 46% for those between 45 and 54 years of age.
The firm said 13% of DB members said the rising cost of living has made them more likely to transfer out of their DB pension, particularly among the under-40s.
Many members display a lack of confidence when it comes to making decisions about their DB pensions, with more than one in five (22%) describing themselves as actively unconfident. Barnett Waddingham said this was likely as a result of differing levels of support. Nearly half (49%) of members have not received any support from their DB scheme to help make decisions about their pension, with those aged over 40 most likely to experience this (58%), despite 60% stating they would appreciate support from their scheme.
By contrast, 51% have had support, with 31% of those benefiting from frequent communication about their options in the years leading up to their planned retirement and 24% receiving financial advice from a financial adviser appointed by the scheme that they paid for themselves. A further 22% have had advice from an adviser the scheme paid for on their behalf.
Debra Logan, partner at Barnett Waddingham, said it’s “vital” that trustees and scheme sponsors rally to provide the best support to members.
Logan says: “The cost-of-living crisis is creating a ripe space for scammers to prey on those struggling to make ends meet. The Pension Regulator’s guidance last year gave trustees the power to halt suspicious transfers if there’s a heightened risk it may be part of a scam, but its vital members feel empowered to spot scams themselves too. Fundamentally, nobody under 55 could transfer out of their pension into cash – anybody who says they can make that happen is lying.
“But there is a clear gap in knowledge and confidence amongst members. Much of this can be solved through better communication and knowledge-sharing, as well as bespoke support from an IFA. It’s positive that there’s a clear alignment amongst members and trustees in favour of offering financial advice via a scheme – the next step is to put that into practice and ensure all members have the tools they need to make the best decisions about their pension.”
Separate research from Aviva found that as many as four in five (79%) employees are concerned about the increasing cost of living, with those approaching retirement age most affected.
According to Aviva’s Age of Ambiguity study, which has been tracking employees’ experiences of work since before the pandemic, nearly a third (30%) of those earning less than £30,000 said their current level of debt is detrimental to their wellbeing. Across all salary brackets, the number of employees who feel this way has risen sharply year-on-year, from 26% in 2021 to 34% in 2022.
Aviva’s findings also highlight a gender divide in the experience of financial wellbeing. Across all age and income groups, less than half (49%) of women would describe their financial wellbeing as good, compared to 67% of men.
Across all income groups, 66% of employees feel that managing their finances has become more difficult recently and one in three (34%) feel they are no longer prepared for unforeseen life circumstances, with this figure rising to 50% amongst those with an income of under £30,000 per year.
Against the difficult economic backdrop, 50% of all employees say their financial situation is affecting their mental health.
Dr Doug Wright, medical director at Aviva UK Health, says: “The relationship between debt and mental health is long established, but in these challenging times, employers need to be closely attuned to their employees’ financial wellbeing, signposting help for those who need it but are unsure of where to find it.
“Being financially responsible does not necessarily guarantee stability – even for people who are experienced with budgeting, the current cost of living crisis is presenting new challenges to their personal finances. Employers should look to offer support that bolsters employees’ confidence, as well as offering practical solutions that appeal to their full breadth of employees.”
