Across the UK, we are living longer than previous generations, with one in three children born today set to live to their 100th birthday. This has big implications for things like the State Pension system – which provides valuable income for those in retirement.
Many people are uncertain what the future might bring, with half of people under the age of 50 believing that ‘there probably won’t be a state pension’ by the time they retire.1
People of all ages must start thinking differently about how they are preparing for retirement, and what they want their journey towards it and their future life to look like, otherwise too many will be left unprepared.
New analysis from Phoenix Group, the UK’s largest long-term savings and retirement business, shows just how on track people of different ages are, for retirement.
The Retirement Readiness Index explores people’s prospects for work and saving, both today and into the future, showing the challenges that individuals face depending on whether they are set to retire in the 2030s or the 2060s.
You can explore the findings below.
In London, 68 per cent of midlifers (aged 45 – 54) are already reprioritising their current spending to ensure they can support themselves in the future. Of this age group, 22 per cent have spent less money on holidays and luxury items to save more, and 19 per cent have increased the contributions they make to their workplace pension – higher than the UK average (14 per cent).
The good news is that those in their 20s and early 30s are more likely to be on track to meet a moderate standard of living in retirement, thanks to the introduction of pensions auto-enrolment helping people to start saving earlier in their working lives. But we know that even for this age group, saving the minimum amount through auto-enrolment may not be enough.
However, those in their late 50s and early 60s appear to be the most restricted in the type of job they can do, as health issues start to get in the way of working. We know that over 1 million people aged 50 to 64 are economically inactive due to long-term sickness.2
Those in their 40s and 50s are the least on track to meet a moderate standard of living, which is defined by the Pensions and Life Savings Association (PLSA) as needing £23,300 per year in retirement. This is why taking action and planning for retirement is so important for midlifers.
These age groups are likely to have missed out on generous final salary workplace pension schemes, as well as the benefits of auto-enrolment into a workplace pension for much of their working lives.
The midlife saving challenge
For those in midlife in particular, the challenges of saving for retirement may likely be compounded by other factors such as supporting children and providing unpaid care for older relatives and parents.
Midlife is also a time when people will be taking stock of how they’re preparing for retirement, whether they plan to fully retire by State Pension age or continue to work in some capacity beyond it. The challenge is clear, with the average UK worker aged 45-to-54 needing to save an extra £160,000 in order to meet a moderate standard of living in retirement.3
The latest research from Phoenix Insights, the longevity think tank from Phoenix Group, shows that a large cohort of midlifers are meeting this challenge head-on, as 5.2 million 45-to-54-year-olds across the UK are taking action to save more for later life.4
But it’s not just about making changes to spending in order to save more, as some 45 to 54-year-olds are considering making significant lifestyle changes to boost their long-term savings. In London, some midlifers are looking to take on more work, with 12 per cent considering applying for a second job, and seven per cent looking to downsize their home.
Phoenix Group’s Patrick Thomson, head of research analysis and policy at Phoenix Insights said: “Across the UK, we are grappling with how to make the most of our longer lives, including how we prepare and save for the years ahead. With only one in ten (10%) of those aged 45 to 54 believing they could live on the State Pension alone when they retire without cutting down spending5, it is more important than ever to take stock of how we work, earn and save for our future, and the futures of those we care about.
“It is great to see that this challenge is being met with action. Everyone’s journey to and through retirement will be different, and it’s clear there is no one-size-fits-all for how those in midlife are saving and planning for this time in their life. But our research shows that people across the UK, including in the North West, are committed to taking the steps – large or small – to build a better retirement for themselves.
“At Phoenix Group, we know it’s not easy, but the first step is to talk. It could be the most important conversation you’ve never had.”
To find out more about what longer lives might mean for you, visit Phoenix Group.
Sources
1 Phoenix Insights (July 2022) Reaching a certain age: Public attitudes to the state pension
2 ONS (November 2022) Data on economic inactivity because of long-term sickness
3 Phoenix Insights (2023) Pensions Heatmap. Nationally representative survey of 2,500 workers over 45 conducted by Opinium 17th to 24th May 2023.
4 ONS (December 2022) Estimates of the population for the UK, England, Wales, Scotland and Northern Ireland – here. 59% of UK population aged 45 – 54 is 5,224,480
5 Phoenix Insights (2023) Reimagining Roads to Retirement. Nationally representative survey of 2,000 workers aged 45-to-54-years-old conducted by Opinium 29th September to 10th October 2023.
