A growing number of UK workers believe they will never be able to afford to retire, with mid-career employees among the most concerned, according to new research.
The study, by Liverpool-based financial wellbeing advisor WEALTH at work, also reveals widespread confusion about how pensions work and highlights the need for more effective support in the workplace.
Almost half (45%) of those surveyed said they do not believe they will ever have enough money to stop working, a sharp rise from 39% last year and 33% in 2023. The age group most affected is 35 to 44-year-olds, where over half (51%) think retirement will remain out of reach.
Most workers (81%) are worried that rising living costs will leave them with a shortfall in their pension savings, and 80% expect to work longer as a result. Nearly a third (32%) plan to delay retirement, rising to 35% among over-55s.
“Workers are getting increasingly concerned that they’ll never be able to afford to retire, with the research finding this peaks for those aged 35-44,” said Jonathan Watts-Lay, director at WEALTH at work. “Most of this group will not have benefited from a full working life of automatic enrolment and are less likely to reach retirement with generous defined benefit, or final salary, pensions than some older generations.”
Early Engagement Makes a Difference
Encouraging people to take small steps sooner could make a significant difference to long-term savings and retirement, according to Watts-Lay.
“For people to better prepare for their financial future, it’s vital that they engage with their pensions as early as possible. Many don’t realise the significant difference a small increase to their pension savings can make,” he said.
“For example, someone in their 20s, saving just 1% more each year into a workplace pension can boost future savings by 25%. This may not feel affordable but making small changes such as setting a household budget, shopping around and not auto-renewing on things like car insurance, as well as utilising workplace benefits, i.e. discount schemes, really can make a huge difference when trying to find that bit of extra cash.”
Rethinking Retirement: Plans and Priorities
With retirement affordability under pressure, Watts-Lay said planning and adaptability are key.
“Those who are approaching retirement should work out a financial plan, starting by carefully looking at what pensions, savings and investments they have, and then how much they think they will need,” he said.
Recent updates from the Pensions and Lifetime Savings Association suggest that the annual cost of a Minimum Retirement Living Standard has fallen slightly to £13,400 for one-person households, and £21,600 for two. But moderate and comfortable lifestyle costs have increased, demonstrating the importance of proactive planning.
“If people find what they have saved isn’t going to be enough, it may be worth delaying retirement or continuing working part-time if able,” said Watts-Lay.
Pension Knowledge Gaps Remain
The research also revealed a worrying lack of understanding about how pensions work. Over one in five workers (21%) did not know their pension is invested and nearly a third (30%) were unaware that they could choose from a range of investment funds, rising to 38% for those aged 55 and over.
A further 39% did not know what their pension is invested in, and a quarter (25%) were unaware that if they do not make a choice, their provider will select a default investment fund on their behalf.
“Pensions may not be the most exciting topic, and the jargon around them can be confusing,” said Watts-Lay. “However, it’s really important that people are educated about their choices and are able to make informed decisions to make the most of their retirement savings.”
Values-Based Investing Could Encourage Engagement
More than half (54%) of respondents said they had considered aligning their pension investments with personal values — including environmental, social and religious considerations — but just 24% had done so.
Watts-Lay said the research offered some hope, saying “many people would increase their pension contributions if they knew it was invested in funds that aligned with their values and beliefs. In recent years there has been a significant expansion of Environmental, Social and Governance (ESG) considerations, with people wanting to align their pension investments with their values and beliefs.”
A Role for Employers in Financial Wellbeing
Just 16% of workers said they turned to their employer for pension guidance, and 26% said they felt unsupported in understanding their pension options, the study found.
Watts-Lay said a more structured approach could help improve outcomes. “For people to achieve better outcomes at retirement, they need support to understand not only their pensions but their general finances including ways to save and invest money, budget and manage debt. Many leading employers recognise this and provide financial wellbeing support in the workplace.”
He added: “Taking an active approach and supporting employees with the help of reputable firms will make the whole process far more robust and will lead to more positive outcomes for all.”