The dilemma of how to achieve a comfortable retirement tops the nation’s wish list for financial advice over the next six months but the peak age for it being an advice priority isn’t until we reach age 55, a new study by St. James’s Place (SJP) reveals.
The study, which surveyed just under 12,000 individuals, found that the top three advice priorities across the country were retirement planning advice, general investment and savings advice, and better budgeting. However, there is a large generational divide as cost of living and budgeting see younger generations push retirement planning down the line. Only one in ten (12%) Gen Z and two in five Millennials name it as an advice priority in the next six months. Against a changing retirement landscape, SJP highlights the importance of starting retirement planning as early as possible.
The nation’s top advice priorities over the next six months
The fifth chapter of SJP’s Real Life Advice Report, launching today, looks at where the nation is likely to look for financial advice in the future and their advice priorities for the next six months. The study found that 1 in 5 people (19%) would find retirement planning advice the most beneficial in the next six months, ahead of general investment and savings advice (17%) and budgeting (14%). Other priorities include:
- Wills planning – 13%
- Putting an overall financial plan in place – 11%
- Keeping my financial plan on track– 11%
- Getting a better mortgage deal – 10%
- Inheritance & estate planning – 10%
Is retirement planning being left too late?
While retirement planning is the top advice priority overall, the study highlights that it most often becomes a major focus only later in life, leaving less time to improve retirement outcomes.
Almost a third (30%) of Gen X (44–59-year-olds) name retirement planning as their advice priority for the next six months; however, it falls much further down the rankings for Millennials (28-43 year-olds) and Gen Z (18-27 year-olds). Millennials rank better budgeting as their top advice priority (22%), with general advice on investment and savings (21%) in second and retirement planning in third place (18%) on par with the demand for advice on mortgages. For Gen Z, advice on how to budget better is again the priority over the next six months for 1 in 4 (26%). Retirement planning sits in fifth place at 12% behind general investment and savings advice (18%), putting an overall plan in place (16%), and advice on managing debt (15%).
SJP’s analysis demonstrates the difference that retirement planning earlier in life can make to retirement outcomes. It finds that if a 30-year-old made a gross investment of £5,000 each year into a pension scheme, they would have a projected fund of £268,000 available at the age of 602. However, just a five-year delay would result in a £67,000 reduction to that retirement fund, and a fifteen-year delay, starting contributions at age 45, would reduce it by £169,000:
| Starting age | Fund value aged 60 if making annual £5,000 investment | Reduction in fund | % reduction in fund | Increase in annual contribution needed to reach £460,000 by 60 years old |
| 30 | £268,000 | – | – | – |
| 35 | £201,000 | -£67,000 | 25% | £1,656 |
| 40 | £146,000 | -£122,000 | 46% | £4,200 |
| 45 | £99,000 | -£169,000 | 63% | £8,508 |
Calculations assume an average annual investment growth before charges of 4.60% each year and investment charges of 1.96% each year. Contributions are invested on the same day each year in a pension and are shown before charges are taken into account.
Claire Trott, Divisional Director of Retirement and Holistic Planning, St. James’s Place, commented: “Whilst it is perhaps unsurprising that advice on budgeting better, investments and savings, and managing debt is more pressing at a younger age, now that individuals have more responsibility for their retirement finances, it’s more important than ever to start planning early. The more time you have to build up your savings pot, the more time it has to compound, resulting in a larger pot when you retire. If you leave it too late, it can be difficult to make up the deficit.”
Planning crucial as long-term trends change landscape for future retirees
SJP’s study also highlights the importance of planning as the demise of Defined Benefit pension schemes and challenges of home ownership mean future generations face very different circumstances to their predecessors, impacting what their retirement looks like. This will, in turn, change the shape of savings earmarked for the next generation, who are a third less likely to pass down assets to loved ones3. While 65% of current retirees expect to pass down property to their family through inheritance, this drops to just 45% among those yet to retire. Similarly, 60% of current retirees plan to pass down cash savings, compared with only 40% of future retirees who share the same intention.
Claire Trott continues: “The retirement landscape is unrecognisable to what it was only twenty years ago. Future generations of retirees are grappling with unique economic circumstances, compared with their parents and grandparents, which will impact their retirement finances. It’s therefore important that individuals do what they can to take as much personal control for their future as possible.
“Making an early commitment to retirement saving is vital, and putting money aside for the future must be seen as a necessary expense and an integral part of budgeting. Given there are many other financial pressures today, it’s important to make good decisions about the money you’ve got, and it may be worth seeking financial advice or guidance to support decision making and to help achieve the desired retirement lifestyle.”
St. James’s Place’s Real Life Advice Report explores the benefits of accessing financial advice or guidance through diverse real-life stories from its advisers and clients. The report, released in a series of chapters, aims to highlight how financial advice and guidance can benefit everyone.
