One fifth (19%) of non-retirees have no private pension, while two fifths (41%) are not currently contributing to a pension, according to the Financial Conduct Authority’s Financial Lives 2024 survey.
Among those with a defined contribution pension, a third (33%) have less than £10,000 saved for retirement.
The FCA’s Financial Lives survey is a benchmark for the state of the nation’s finances, covering a huge number of topics across all the retail financial sectors it regulates.
Dan Coatsworth, investment analyst at AJ Bell, said: “Many individuals appear to be setting themselves up for a nasty shock later in life by not putting enough money away for the future.
“The FCA’s Financial Lives survey implies that a lot of people will be too reliant on the State Pension to pay the bills and support their lifestyle once entering retirement.”
The full State Pension of £11,973 a year doesn’t leave much left over “for any of life’s luxuries,” said Coatsworth.
“The FCA’s survey shows that one third of adults have less than £10,000 saved in their pension, which is worrying. That’s not such an issue if they’re in their twenties and thirties and have decades ahead to put money away, but it’s troubling if someone who is in their forties, fifties or early sixties is in this situation. It’s vital that people have the support they need to squirrel away as much as they can while they’re still working,” he said.
The survey found more than one in five (22%) non-retirees admitted they were unprepared for retirement because they don’t understand their options, while 31% had not thought about how they will manage financially in retirement.
Coatsworth added: “It might feel as if everyday life is already putting big demands on your money and that it’s hard to deal with the here and now, let alone prepare financially for years down the line. However, kicking your retirement saving down the road could be a grave mistake. Every little extra you can put away now could make a big difference to the life you can afford to live in your golden years.”
The FCA’s findings also revealed that one in 10 UK adults have no cash savings at all and 21% have less than £1,000 to draw on in an emergency, leaving a large number of people vulnerable to economic shocks and unexpected bills.
In addition, one in four people in the UK have low financial resilience, meaning that they have missed payments, are struggling to keep up with commitments, or don’t have savings to help them through difficulties.
Meanwhile, 26.4 million people were shown to have characteristics of vulnerability. Nearly three fifths (58%) of adults in poor health said they had issues managing their finances or interacting with providers due to their condition, rising to 91% among those with social or behavioural difficulties.
Not surprisingly, 11.9 million people feel overwhelmed and stressed, with 22% of all adults feeling stressed dealing with financial matters and 40% of adults with credit or loans admitting they suffer anxiety and stress because of their debt.
Rachael Griffin, tax and financial planning expert at Quilter, commented: “The FCA’s survey lays bare the financial tightrope that millions are walking. These are not isolated issues; they’re symptoms of a system that too often expects people to make complex financial decisions without access to affordable support or a foundation in financial education.
“One solution that must not be overlooked is the FCA’s proposed introduction of ‘targeted support’, a middle ground between full advice and generic guidance that could allow firms to offer help where it’s most needed, particularly to those struggling with savings or retirement planning.”
The survey also revealed that three in five (61%) adults with more than £10,000 of investable assets hold at least three quarters of these savings in cash, an issue that has raised concern among the Government and FCA.
Griffin said the preference for cash savings “speaks to a broader cultural resistance to invest, and perhaps to a lack of confidence or understanding in navigating financial markets.”
Chris Cummings, CEO of the Investment Association, said: “Many people in the UK may be taking one of the biggest financial risks of all: taking no risk.
“We must create a culture of inclusive investment that educates and encourages people across the country to make financial decisions that benefit them both now and for the long term. This includes looking at options for ISA reforms to better support long-term investment, improving access to financial advice and modernising the retail disclosure framework to shift the focus from warning to informing and empowering consumers.”
While the number of people receiving financial advice has edged up slightly from 8.3% in 2022 to 8.6%, there was also agreement that this figure should be higher.
Steven Cameron, pensions director at Aegon UK, said: “Enabling wider access to advice should be part of the FCA’s agenda to support the Government’s growth agenda. It will also be interesting to track how the introduction of targeted support impacts on the Government-sponsored MoneyHelper guidance service. It can only be a positive for consumers to have access to both advice and a range of guidance services.”
Main image: hello-i-m-nik-LUYD2b7MNrg-unsplash
