The DWP have recently released the results of its second ‘Planning and Preparing for Later Life’ survey, based on questions posed to over 4,000 people aged between 40 and 75. The answers showed some conflicted – or perhaps just wishful – thinking. For example:
- State pension: Around two-thirds of people below State pension age (SPA) said the amount of State pension they receive would be very important/important in their decision on when to retire. That supports the findings of other research. For example, in 2023, the Institute for Fiscal Studies found that on average the State pension (currently £230.25 a week) made up 44% of income for households aged 66–70 and 71% for the poorest fifth of that group.
- Nevertheless, the DWP survey showed that 44% of people expected to retire before their SPA (currently 66, rising to 67 by April 2028). In terms of an ‘ideal retirement age’, those who had not yet retired settled on a median age of 60. Anyone retiring at that age now will be left with a seven-year State pension gap of over £83,000 (plus triple lock increases) to fill.
- Planning for retirement: Despite the ideal retirement age of 60, the pattern of saving for retirement suggested other goals had a higher financial priority. Only 59% said they started saving for their retirement in their 20s or 30s. What the DWP described as “actively planning” for retirement began at a later age. 45% of people who were semi-retired and 40% of those fully retired did not start active planning until their 50s. Only about one-in-five of semi-retired and fully retired people entered the active planning phase earlier in life.
- Income adequacy: 41% of people said they ‘had no idea’ how much income they would need in retirement. Yet when asked how confident they felt about their pension decisions on a scale of 1 to 10, the same people gave themselves an average score of 5.1, with only about one-in-eight owning up to 0 confidence.
If some of those conflicting responses resonate with you, one other finding of the survey is worth noting: people with a private pension who had used regulated advice or guidance in the last 12 months felt more confident making decisions about pensions.
The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.
