Great British Retirement Survey highlights how inflation is wrecking retirement dreams

This year, Britons have gone from locked in by the pandemic to priced out of retirement, as the cost-of-living crisis bites, and savings plans are cut or axed.

• Cost-of-living crisis forcing more than half of Britons to curtail or scrap saving
• Pressure rising: two in three people (65%) say their financial situation impacts their mental health
• Later-life talent drain: only one in three 55-to-65-year-olds say they work full time – one in three have cut hours due to health issues or care responsibilities
• 10 years after the introduction of auto-enrolment, one in four say they know NOTHING about pensions
• Women struggle most: half of those over 65 live on the state pension, and are more likely to reduce working hours due to ill health or caring responsibilities
• Bank of Mum and Dad still propping up the mortgage market: 17% of lower-income households gifting half their annual income to help kids on the ladder
• People continue to overestimate their retirement income by around 30%

A year ago, the theme of the interactive investor Great British Retirement Survey was “I want to break free.” Never had the thought of retirement seemed rosier, emerging from months of lockdown.

This year, Britons have gone from locked in by the pandemic to priced out of retirement, as the cost-of-living crisis bites, and savings plans are cut or axed.

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The interactive investor Great British Retirement Survey, published today, shows how the cost-of-living crisis is draining savings and compromising the UK’s retirement prospects. With a sample size of 10,000 and over 100 detailed questions, it is one of the largest retirement surveys of its kind. Research was conducted for ii by Opinium Research, between May – July 2022.

Cost of living pain 

The rising cost of living is now the UK’s top financial concern and a big worry for three in five (59%) people. Of those most concerned about the rising cost of living, 73% of them say their financial situation impacts their mental health.

Overall, two in three people (65%) feel that their financial situation impacts their mental health – rising to three in four (76%) people in their 20s and 30s – the pressure is intensifying.

More than half (56%) of the population aged under 66 have had to curtail their saving, with one in three (36%) cutting back, and one in five (20%) stopping altogether. Young people’s savings have been hit particularly hard, with two in three (64%) of 22-34 year olds having stopped, or cut back, their saving.

The crisis is even affecting higher earners on £60,000 or more. Almost as many of them are cutting back on their savings as those earning less than £30,000 (54% versus 58%).

Richard Wilson, CEO, interactive investor, says: “We are privileged to publish this detailed examination of the state of the nation’s retirement finances and savings. In many parts it makes difficult reading.

“Many people are struggling. There is a close link between wealth and health. What also emerges is the crucial role a strong healthcare system plays in enabling people to save, work later in life, and live a full retirement.

“Yet, we also see the threads of love and care that hold communities together. We see them in the large numbers giving up work to care for a parent, child, or spouse. We see them in the sacrifices lower-income households make to help children on to the housing ladder.

“We also see retirement outcomes being routinely compromised by just ‘not knowing.’ Nearly one in four (24%) of the general population say they know nothing about pensions. In a world of pension freedoms, and after 10 years of auto-enrolment, this is a clear policy failure.”

Stock market pain

For much of the general population, the performance of the stock market can feel less important than the pressing day-to-day problems of rising prices and budgeting, but it has added to woes.

Only 9% of ii’s general population sample (this sample represented half of the 10,000 survey) said that stock market performance was their biggest financial concern. But members of the interactive investor community (the other half of the sample) – particularly those in and approaching retirement – have watched the market tumult this year with growing anxiety. Stock market losses remain the number-one concern, with 40% very worried about the stock market.

Becky O’Connor, Head of Pensions and Savings, interactive investor, says: “If the majority of us have spent our lives in blessedly uninteresting times, we surely now feel inclined to acknowledge those times have passed. The speed at which individual and communal realities shift feels dizzying; the adjustments we each have made and have to make are rapid.

“One worrying constant is that while savings are being cut back, often because there is no other option, people continue to overestimate their retirement income by an average of around 30%. The average amount people expect to retire on is £21,730 – that’s £5,190 or 30% more than our current retired respondents receive.

“The danger is that the cost-of-living crisis leads us head on into a full-blown retirement crisis. With savings increasingly being cut to the bone, it’s crucial that where possible, people think carefully about how they balance medium and longer-term savings goals. Pension contributions come with a wonderful perk - free money in the form of tax relief. Let’s preserve them as much as possible, so they can nurture us through life’s ups and downs.”

Doing it for the kids

The demands of the property market continue to place additional demands on retirement funds. Many retirees are grappling with supporting their children. One in five (21%) have helped their adult children buy property by giving them money for a deposit as a gift; 6% have given them a loan, and a further 2% have acted as guarantors.

The gifts are generous – the average amount is £18,400. And often sacrificial. Nearly one in five (17%) parents with household income of less than £30,000 have given a gift, with the average amount given £15,500. In other words, they have given half a year’s income to help loved ones.

Later-life talent drain and NHS issues

A huge amount of later-life working experience is being lost to the economy as older workers cut their hours or retire early. Only one in three people surveyed between the ages of 56 and 65 work full time – close to half as many as those under 56 (60%). One in three are living the dream – cutting back for a better work-life balance or because they no longer need as much money.

But a similar amount face a later-life financial nightmare, with 21% cutting their hours because of ill health and 13% because of caring responsibilities. This comes at a time when the government is reviewing bringing the state pension entitlement age increase to 68 forward.

With record numbers – nearly 7 million – on NHS waiting lists for consultant-led elective care (up from just over 4 million at the start of the pandemic), many have been forced to go private.

Nearly half (49%) of our retired respondents have significant lasting physical or mental conditions. 17% have paid for medical treatment (versus 11% for under-55s). Those retired in our interactive investor community are much more likely to have paid for treatment (38%).

Despite the increased need for health cover, older people over 65 are less likely to have private medical insurance (8%, compared with 21% for those under 40). Many would like the reassurance of healthcare cover but cannot afford the premiums.

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “One of the problems driving inflation is the shortage of workers in Britain. We cannot afford to have so many people forced to stop work because they or a loved one is ill. And the financial impact on these households can be horrendous and lasting. This is a time of life when many people have paid off the mortgage and start saving like mad to build their retirement pot. Instead, lots are forced to begin drawing from their savings early, making a huge difference to their retirement outcomes.”

Financial capability

A decade on from the introduction of auto-enrolment far too many of us still do not know enough about our pensions. One in four say they know NOTHING. Britain’s are paying the price for a lack of financial education in schools.

People tend to be overoptimistic when estimating their likely personal retirement income. The average expectation is £21,730 – 30% more than reality, which on average is £16,540 (taken from ii’s nationally representative sample of people who consider themselves retired).

Most people have no target for retirement saving and few people have any sense of how they are progressing. Six out of 10 (61%) have no idea what their income will be in retirement. Only one in 10 (11%) know what money they will have coming in.

One in three (32%) of over-55s have taken a lump sum out of their pension, with a third (33%) of these putting the money in a bank or savings account. This is despite inflation hovering around double figures. Members of the interactive investor community are more likely to put the money in a stocks and shares ISA (50%, compared with just 10% for the general population).

44% feel their employers have not done enough to inform them about their pensions; this figure rises to 52% for those under 40.

Becky O’Connor, Head of Pensions and Savings, interactive investor, says: “It is a massive policy failure that so many retirement outcomes are being compromised by a lack of financial education. We have to address this at an early age, to give people the knowledge and time to save and invest wisely. It should start at schools, and a number of our respondents said they wished they had learned about money at school.

“We need to resist the lazy assumption that young people are not interested in pensions. They are, as the growing interest in long-term investment and retirement content on platforms such as TikTok attests, if only it is communicated in the right way. Social media has become a key source of financial information for 22% of the general population and for more than a third (37%) of under-35s.

“We continue to lobby the government on issues close to our heart, including the need for more financial education in schools, which we think could lead to better long-term outcomes. Pension education for 11-year olds sounds punchy, but we are optimistic that even at 11, children can get it. Eleven is a pivotal age – when many are making the jump from primary school to ‘big school’ and it would be a vital stepping stone to create a healthy relationship with money and saving that will see them through their lives.”

Gender pension gap

The survey has again highlighted the gender pension gap. Almost half of women (48%) over 65 live on the breadline state pension (compared with 29% of men).

Women between the age of 56 and 65 are more likely to reduce working hours through ill health – 25% compared with 17% for men. Women in this age group also carry the main burden of care for loved ones – 18% cut their working hours because of care responsibilities, compared with 7% of men.

Women are also less likely to understand pensions and investments – 29% say they know nothing about pensions, compared with 18% of men.

Becky O’Connor continues: “More could be done to empower and educate women about financial matters, but the bigger issue is the inequality that pervades the whole system, leaving women far more vulnerable in retirement. Our survey is just the tip of the iceberg in highlighting the stark contrast between the financial experience of older men and women.”

The rising cost of living is now the UK’s top financial concern and a big worry for three in five (59%) people. Women have high levels of concern (65% against 53% of men), as do those who are divorced, widowed or separated (69%), homemakers (68%), those on lower incomes (64%) and those working part-time (64%) or who are unemployed (64%).

Notes to editors

The 2022 interactive investor Great British Retirement Survey was conducted between March and July 2022, and more than 10,000 UK adults responded.