New research by leading price comparison website, MoneySuperMarket, reveals many people in the UK haven’t even started thinking about saving for retirement. Most have no idea how much they need to save to live a comfortable life in the future and worryingly, nearly half are not considering buying life insurance to protect their dependants from debt and provide for their financial needs.
Using unique consumer research, MoneySuperMarket has created an interactive tool that people can use to test how prepared they are compared to their peers, with results tailored by the user’s age and gender.
The study reveals an overall lack of future-proofing across all age ranges. Despite three-fifths (59 per cent) acknowledging they have financial dependants, only a third (33 per cent) currently have life insurance and nearly half (48 per cent) never plan to take out a policy.
Life insurance provides a financial safety net by releasing funds that can be used to clear debt and meet dependants’ living costs following the policyholder’s death.
Retirement planning is an area often overlooked by Brits, according to the study. Nearly half (48 per cent) of respondents have no idea how much is in their pension pot, while over a quarter (26 per cent) simply do not have a pension.
The average pension pot can require as much as £370,000*. Despite this, millennials (18-34 year olds) in particular show a lack of knowledge about pension planning and vastly underestimate the amount needed to live comfortably in retirement, by 58 per cent or £213,400. Women are also less likely to have a pension: nearly a third (29 per cent) of women asked did not have one, compared to just a fifth (21 per cent) of men.
The North-South Divide
The study also identifies key regional differences with regard to savings and preparation for life after work.
Despite the high cost of living, Londoners are the biggest savers, with £14,611 saved on average. This is 55 per cent more than those from the West Midlands, who have saved the least on average, despite being most aware of their pension pot amount. Only 35 per cent of East Anglian respondents were aware of the actual amount in their pension pot.
Overall, respondents from the North (51 per cent) of the UK underestimate the recommended pension pot amount by nearly 10 per cent more than those from the South (42 per cent).
What are You Saving For?
Of those asked, a fifth said they are saving for retirement (22 per cent). This lags behind saving for a home as the most popular saving ambition among 18-24 year olds (39 per cent are saving for this).
Across all age groups, women are more likely than men to be putting money aside to buy a property (11 per cent of women vs. eight per cent of men). In every other category, including putting money aside for holidays or their child’s future, men are more likely to be saving than women.
Kevin Pratt, consumer affairs expert at MoneySuperMarket, commented: “Brits face all sorts of calls on their money and it’s easy to see why the cost of everyday living can trump longer-term objectives such as saving for retirement – especially if you’re not fully aware of how much you’ll need in retirement. But anyone who can get into the savings habit gives themselves a better chance of building up the sort of pension kitty that’s needed to fund a comfortable lifestyle once they stop work.
“Anyone who has dependents should make life insurance an absolute priority, as the financial consequences of an early death can be catastrophic. Policies can be set up to pay off a mortgage and other debt, and also to provide money to meet the day-to-day financial needs of those left behind if the policyholder dies. As a result, it’s important that people take the time to look for a policy that’s best suited for their needs.”
To find out how financially ready for the next stage of life you are check out the interactive online tool and answer eight simple questions to see how you compare to the nation.