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Retirement Planning - UK - January 2019

“The considerable increase in pension ownership as a result of auto-enrolment has played a key role in boosting engagement in retirement planning. Nevertheless, there remains a dire need to further raise not only the overall level of engagement but also the quality of it. Few non-retired adults do much about retirement planning outside of checking the value of their pension. While new technologies like the pensions dashboard and automated advice can facilitate the type of engagement necessary for effective retirement planning, widespread adoption is unlikely in the near term.”

– George Zaborowski, Senior Analyst – Financial Services

This report examines the following issues:

  • Millennials’ views about retirement indicate rising demand for flexible solutions
  • Resistance to new technologies preventing greater engagement in retirement planning

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Table of contents

  1. Overview

    • Executive Summary

        • The market
          • Length of average retirement set to continue rising
            • Figure 1: Expectation of life for those aged 65 in each year, period principal projection, by gender, UK, 1981-2066
          • Over 41 million UK adults now have a workplace pension
            • Figure 2: Number of employees with workplace pensions, by pension type, 2009-17
          • The consumer
            • 62% of non-retired adults own a pension
              • Figure 3: Pension product ownership, October 2018
            • Most foresee drawing on non-pension sources of funding in retirement
              • Figure 4: Other savings and investment products held for retirement, October 2018
            • Just two in five have taken any steps to plan for retirement
              • Figure 5: Retirement planning steps taken, October 2018
            • Few currently interested in new retirement planning technologies
              • Figure 6: Retirement planning tools and services most likely to consider, October 2018
            • Majority are open to working beyond state pension age
              • Figure 7: Attitudes towards retirement and retirement planning, October 2018
            • Situational limitations and conflicting priorities main barriers to retirement planning
              • Figure 8: Barriers to retirement planning, October 2018
            • What we think
            • Issues and Insights

              • Millennials’ views about retirement indicate rising demand for flexible solutions
                • The facts
                  • The implications
                    • Resistance to new technologies preventing greater engagement in retirement planning
                      • The facts
                        • The implications
                        • The Market – What You Need to Know

                          • Ongoing improvements in longevity have altered retirement planning
                            • Over 41 million now have a workplace pension thanks to auto-enrolment
                              • The SIPP market has grown significantly in recent years
                                • Most currently going into drawdown at retirement
                                  • Proportion working beyond retirement age on the rise
                                    • Recent government initiatives have struggled to provide support
                                    • Retirement Planning Environment

                                      • The average length of time in retirement set to keep rising
                                        • Figure 9: Expectation of life for those aged 65 in each year, period principal projection, by gender, UK, 1981-2066
                                      • Improving longevity is putting increased pressure on state finances
                                        • Figure 10: UK population, by age band, and dependency ratios, 2016-86 (Based on 2016 projections)
                                      • State pension age eligibility being progressively pushed back
                                        • Figure 11: Projected dates for full transitions to increase in state pension ages, by gender
                                    • Retirement Funding Options

                                      • 41 million employees have a workplace pension
                                        • Figure 12: Number of employees with workplace pensions, by pension type, 2009-17
                                      • DC pensions require savers to be more switched on
                                        • Figure 13: Proportion of employee jobs with workplace pensions, by type of pension, 2017
                                        • Figure 14: Proportion of employees with workplace pensions, by age band and type of pension, 2017
                                      • ABI data reports falling new individual pension business
                                        • Figure 15: Number of new individual personal and stakeholder pensions, 2012-17
                                      • Regulated SIPP sales volumes nearly reached 1 million in 2017
                                        • Figure 16: Number of regulated SIPP, personal pension and stakeholder pension sales, 2013-17
                                      • Lifetime ISA offers savers a new pension-like alternative
                                        • Figure 17: Number of ISAs and amounts subscribed, by component type, 2011/12-2017/18
                                      • Drawdown now the default option for many at retirement
                                        • Figure 18: Volume of new annuity and income drawdown sales, 2013-17
                                      • More people expected to work past 65
                                        • Figure 19: Employment rate among people aged 65+, Q1 2011-Q3 2018
                                      • Equity release is increasingly popular to fill gaps in retirement funding
                                        • Figure 20: Sales of equity release products, by volume and value, 2011-17
                                      • Buy-to-let property has become a less attractive savings alternative
                                        • Figure 21: New buy-to-let mortgages, by purpose of loan, not seasonally adjusted, 2012-17
                                    • Regulatory and Legislative Changes

                                      • Pensions dashboard set to be launched in 2019
                                        • Single Financial Guidance Body to go into service from January 2019
                                          • Annuity customers must be made aware of best available market rates
                                            • Government initiatives to boost the use of pension advice have flopped
                                            • The Consumer – What You Need to Know

                                              • 62% of non-retired adults own a pension
                                                • Most envision drawing on non-pension sources of funding in retirement
                                                  • Few are actively planning for their retirement
                                                    • Millennials have distinct views about retirement
                                                      • Situational limitations and other priorities key barriers to engagement
                                                      • Pension Product Ownership

                                                        • Four in five full-time employees have a pension
                                                          • Figure 22: Pension product ownership, October 2018
                                                        • Fewer than half of Younger Millennials own a pension
                                                          • Figure 23: Pension product ownership, by generation, October 2018
                                                        • Lower earners least likely to have a pension
                                                          • Figure 24: Pension product ownership, by gross annual household income, October 2018
                                                      • Other Products and Plans for Retirement

                                                        • Half plan to use cash savings to help fund their retirement
                                                          • Figure 25: Other savings and investment products held for retirement, October 2018
                                                        • Under-35s most likely to plan on using cash
                                                          • Figure 26: Other savings and investment products held for retirement, by age, October 2018
                                                        • Over the long run, returns on cash savings liable to disappoint
                                                          • Pension owners more likely to be engaged in retirement planning
                                                            • Figure 27: Other savings and investment products held for retirement, by pension ownership, October 2018
                                                          • 60% plan to use a non-financial services-related resource in retirement
                                                            • Figure 28: Other retirement funding plans, October 2018
                                                        • Retirement Planning Activity

                                                          • Most non-retired adults have not done any retirement planning
                                                            • Figure 29: Retirement planning steps taken, October 2018
                                                          • Just 28% are regularly saving for retirement
                                                            • Figure 30: Retirement saving activity, October 2018
                                                          • Pension ownership boosts activity
                                                            • Figure 31: Retirement planning steps taken, by pension ownership, October 2018
                                                          • Women lag behind men in retirement planning activity
                                                            • The quality of engagement needs improvement
                                                            • Interest in Retirement Planning Services

                                                              • Interest in new retirement planning technologies is lacking…
                                                                • Figure 32: Retirement planning tools and services most likely to consider, October 2018
                                                              • …but is notably higher among pension owners and younger generations
                                                                • Figure 33: Retirement planning tools and services most likely to consider, by generation, October 2018
                                                            • Attitudes towards Retirement and Retirement Planning

                                                              • Most are prepared to consider working beyond state pension age
                                                                • Figure 34: Attitudes towards retirement and retirement planning, October 2018
                                                              • Working into retirement a less daunting prospect for the affluent
                                                                • Figure 35: Agreement with selected statements about retirement and retirement planning, by socio-economic group, October 2018
                                                              • Millennials’ views can vary greatly from other generations’
                                                                • Figure 36: Agreement with selected statements about retirement and retirement planning, by generation, October 2018
                                                              • Pension scams threaten to put younger people off using pensions
                                                              • Barriers to Retirement Planning

                                                                • 77% identify a specific barrier to engagement in retirement planning
                                                                  • Figure 37: Barriers to retirement planning, October 2018
                                                                • For most, just one or two things are getting in the way
                                                                  • Figure 38: Number of barriers to retirement planning, October 2018
                                                                  • Figure 39: Barriers to retirement planning, by number of barriers to retirement planning, October 2018
                                                                • 35% of Millennials identify three or more barriers
                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                    • Abbreviations
                                                                      • Consumer research methodology

                                                                      Retirement Planning - UK - January 2019

                                                                      US $2,552.20 (Excl.Tax)