Catherine Foot, Director of longevity think tank Phoenix Insights, part of Phoenix Group, comments:
“The state pension is a hugely important and popular part of our benefits system, with nearly half of the population relying on it for the majority of their income later in life. But our research shows that adults in Britain are fearful that it won’t exist in the future.
“After a period of historic declines, pensioner poverty is on the rise again and the current cost of living and high housing costs are putting huge pressure on people’s ability to put anything aside for the future. This review has a critical role to play in advising Government on how to ensure that future generations of retirees are protected from poverty.
“We have shared our latest insight to shine a light on some of the intergenerational challenges that we have found to exist, particularly around housing and people’s confidence in their ability to stay in work and to save for the future. Our research also shows the majority of adults in Britain aim to retire before the current state pension age, with 65 being the most popular age, but it is clear there is a big mismatch in people’s confidence in their plans and the reality.
“We believe that particular attention needs to be paid to the impact any changes may have on Gen X who are approaching retirement, those renting, and that people’s perceptions about the state pension and their lack of confidence when it comes to their own financial future needs to be front of mind.”
Key points from Phoenix Insights response to the Independent review looking at the factors that need to be considered by the Review.
- Perceptions around the state pension should be taken into account, many worry there won’t be a state pension at all.
New polling from Phoenix Insights shows that 84% of adults in Britain believe that providing the State Pension is an essential role for government. Despite this, one in three (34%) think that there probably won’t be a State Pension by the time they retire. This rises to more than half (53%) of adults in Britain aged 25 to 49.
Current perceptions show that:
· 51% of adults in Britain think the State Pension system has benefited older generations the most
· 5% believe it will benefit younger generations the most.
· 25 to 49 year olds are most likely to believe that older generations have benefited the most from the State Pension system, with 62% believing this is the case.
- Housing should not be overlooked when it comes to intergenerational fairness and retirement
· Phoenix Insight’s Longer Lives Index shows that home ownership is significantly lower in younger age groups, an age effect of asset accumulation as well as a generational effect of the housing market.
· Of the four in 10 current renters, less than a third expect to buy a house, leaving close to 11 million adults facing ongoing rental costs in retirement.
· Over half of those expecting to rent in retirement worry about how they can afford their rental payments, even though many should expect housing support in the future. This low confidence is concerning and signals potential large scale financial resilience issues among renting retirees in the future.
· Among those expecting to buy a house before they retire, around 30% are not confident about their ability to do it.
- The potential impact of any proposed changes on those aged 40 to 55 should be a key consideration of the Review
· Research from ILC-UK supported by Phoenix Group (‘Report: Slipping between the cracks? Retirement income prospects for Generation X’) showed a worrying picture for the 13.8 million Gen Xers in the United Kingdom in 2020.
· Over a third (39%) of those Gen Xers yet to retire expect to rely on either the property they live in, e.g. via downsizing, or an inheritance according to this research. However, these incomes may not be reliable or may be needed for other reasons.
· One in ten hope to use their home to support their retirement, and 11% who expect this to be their main income source in retirement, either don’t currently own a home or don’t expect to pay off their mortgage by the time they retire.
· Gen X is an extremely diverse cohort, with a particular concern being those among them who were too young to receive widespread DB pensions but too old to have benefited from Auto-Enrolment for the bulk of their working lives. The Review needs to consider how this group might be impacted by any proposed changes.
- Adults in Britain don’t know how much time they need to prepare for any changes.
Many adults in Britain (79%) from our recent polling with YouGov) ‘do not know’ how long it would take to prepare financially if the Governemetn were to raise the age at which they would be eligible for the state pension. This highlights the challenge that the vast majority of people have in knowing how to plan for the future.
· More than a third (36%) of those who say they are confident about saving enough for retirement actually have a substantial saving gap of over £100k according to our Longer Lives Index, showing a huge disconnect between perceptions and reality.
· The lack of savings confidence and the mismatch between people’s confidence and reality must be considered carefully when reviewing any further changes to the State Pension age.
All figures above are from YouGov Plc. Total sample size was 2,003 adults. Fieldwork was undertaken between 21st – 22nd April 2022. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).
- When it comes to making retirement decisions, the state pension age currently becomes a more important consideration for adults aged 50-64 in Britain
· Health (66%) and affordability (62%) are the top factors that adults in Britain who are yet to retire give for determining when they expect to retired. Only 18% said being eligible for the State Pension is important in determining when they will retire.
· However, it should be noted that being able to receive the state pension age is a top 3 decision maker for almost 3 in 10 adults in Britain (27%) who are aged 50-64, showing that the age at which it becomes available is more important to this age group. Similarly, of those who have retired, just over 3 in 10 (28%) said that being able receive the state pension was a top three decision making factor. Women (21%) are more likely than men (15%) to say that State Pension eligibility is important for determining the age that they think they will retire.
· The majority of adults expect to retire earlier than the current State Pension age. Our Longer Lives Index shows that 65 is the most popular age people plan to retire, indicated by one in four respondents.
· However, our Longer Lives Index also shows that 10 million of us are not confident in their ability to secure work, worried that ill health and a lack of skills will stop them from earning what they need to save for retirement