A soundtrack to The Great British Retirement Survey 2021

The biggest retirement survey of its kind is back with more than 10,000 people helping paint a picture of finances in later life in the UK. interactive investor's head of pensions and savings Becky O'Connor introduces the 2021 report, which you can read in full here.

I Want to Break Free is one Queen song to which many of us might have found ourselves involuntarily humming along during recent months, as a collective sense of cabin fever had people longing to get out.

We certainly found ourselves strumming air guitar and channelling Freddie Mercury while working through the findings of the third annual Great British Retirement Survey from interactive investor.

Who Wants to Live Forever was not a question for this survey, but we did ask ‘What does retirement mean to you’? and found the pandemic seems to have prompted a rosier view of retirement. These Are the Days of Our Lives could be the title of choice for those who told us they want to spend retirement enjoying freedom, independence, travel and hobbies. More people than last year associated retirement with a life of pleasure. The YOLO (you only live once) view of life, whether a temporary pandemic response or permanent, was certainly in evidence among the responses.

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Notably up from last year was the proportion associating retirement with travel. Dreams of vistas other than the end of the garden translated into two thirds of people (67%) hoping to get around more in retirement. Almost one third – 29% of those yet to retire, put travel as their top retirement priority. This lust for life, if you’ll permit a bit of Iggy Pop in the mix, may prove motivating, encouraging people to invest even more, so that they are able to seize the day in future. Or it may instead cause people to dip in perhaps a little too much to the wealth they have built up, then risk not having enough to last the whole of their retirement. We will have to wait and see how that particular trend translates into retirement planning.

The desire to break free was also evident in responses around drawdown. The increasing complexity of both building and accessing a decent pension pot had many nostalgically yearning for simpler times, when a pension paid you a decent income for life and you didn’t have to think about it. I Want It All springs to mind. However, the desire for simplicity has not translated into renewed demand for annuities, with most still viewing them as poor value and opting for the more complicated but more rewarding drawdown instead.

Despite most people choosing drawdown, the drawbacks of this approach to retirement income were a strong theme for those who had already begun to access their pensions: Under Pressure the theme tune for those trying to make multiple pots last, keep charges and tax down and returns high, but risk as low as possible. The complexity of drawdown has left many feeling under pressure to make the right decisions but not always feeling they have sufficient knowledge to do so. The flipside of freedom may be less simplicity and more time spent considering your options.

Some respondents were anxious, seeing government policy changes as undermining the endeavour of investing in a pension. Potential changes to the Lifetime Allowance were a source of anxiety for those likely to be affected – I Want It All again the refrain of those who don’t see why they should pay a tax charge for strong investment growth. Many respondents see the entire pensions system as under pressure from the government, as it looks at ways to pay pandemic debts. Young respondents doubt whether the state pension will be there for them at all when they retire – assuming it will be a case of Another One Bites The Dust.

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Those who fell into one of the vulnerable categories we identified, including: those not entitled to the full state pension, women facing pension inequality, the self-employed, disabled people, people with outstanding debts and scam victims, reported that their circumstances had dented their retirement prospects. Worryingly, fewer scam victims reported getting their money back this year. Keep Yourself Alive the tune that perhaps resonates the most with those at the sharp end of managing retirement income. The more vulnerable respondents feel under financial pressure to live off less and to continue to work past retirement age. Finally, worries about stock market returns falling add to this pressure cooker atmosphere for those approaching or already in retirement, with so much dependent on factors beyond our individual control.

The impact of the pandemic on household finances is well documented, but our survey responses suggest that on balance, more people were feeling wealthier as a result of making unexpected savings than had experienced financial loss. Those who had suffered financially were a significant minority.

The Show Must Go On, naturally, and despite pressure, anxiety, falls in the value of pension portfolios, the freezing of dividend income payouts and loss of earnings for older workers in the pandemic, pensions remained the first choice product for retirement planning among our respondents, although people were keen to point out ways the system could be improved. Among the comments left were some practical suggestions for solutions to some big issues, with respondents floating the ideas of pooling Lifetime Allowances for couples and offering further tax benefits to the millions of unpaid carers in the UK, who see their pensions suffer through time out of formal employment.

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Finally, the wish to learn about and manage pension investments independently was a strong theme. The increase in the percentage of respondents who said they did their own research when making decisions was dramatically up on last year, as lockdowns gave people time to do their own research. We Are The Champions the song choice for those independent-minded investors who prefer the DIY approach of becoming their own financial expert and investing their way to pension victory.

Becky O'Connor is interactive investor's head of pensions and savings.

Read the full Great British Retirement Survey report here.