Great Expectations

Phoenix Insights

Longevity Think Tank

01 Sep 2022

Reports

Many people working today face a huge challenge when it comes to planning and saving for their financial security in retirement. Using our Phoenix Insights Longer Lives Index data – a survey of 16,500 people aged 25 and over who aren't yet retired - we explore the adequacy and achievability of people’s retirement income expectations and look at how financial preparedness can be better achieved.

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Are people's retirement income expectations adequate and achievable?

Our report segments savers in defined contribution pension schemes into the five groups shown below and reveals the results of our modelling beside their expectations (source Pensions and Lifetime Savings Association)

The 'Financially Struggling'

An expected income in retirement of less than the PLSA minimum retirement living standard.

The 'Undersavers'

Expected to receive at least the PLSA's minimum income but perhaps not on track to achieve it.

The 'Downgraders'

Look on track to receive at least the PLSA's minimum income but insufficient to maintain pre-retirement living standards.

The 'Unsure'

Undetermined expectations of income in retirement.

The 'Happily On Track'

Look on track to receive above minimum income in retirement and able to maintain pre-retirement living standards.

What can people do to adequately prepare for retirement?

To get on track to reach retirement income targets, some individuals might need to increase the percentage of salary saved (to 12%) and work longer than planned (to 68). But our modelling shows that this approach mainly benefits middle and higher earners. Why? Because increasing your savings can be challenging, particularly in the context of high inflation, and working for longer just isn't possible for everyone. Our findings show that nearly four in ten people worry about working for longer because of the impact on their physical health.

An expectation versus reality mismatch

Our report highlights the importance of understanding people's expectations and whether and how they can enjoy the retirement they've been planning for. Future policies must take into account the fact that for many there seems to be a mismatch between expectation and likely reality.

What we need to do:

Engage people more effectively in their financial futures
Make working for longer more feasible, attractive and rewarding
Encourage saving for those who can afford to through more flexible provision
Create a safety net of support for those unable to work longer or save more
Recognise that financial preparedness is about more than just pensions and savings

Exploring these questions is paramount. If people aren't on track for the retirement they expect, they'll need to take action, and the sooner they do this, the more positive the outcome will be.

Watch our webinar

"Do we want to live in a society where everybody has an opportunity in retirement to have the minimum standard of living, have a decent standard of living in retirement? If that were our net zero what are the big actions that we're going to really need to take and how challenging will they be…"

Joining Catherine Foot, Director of Phoenix Insights to discuss the Great Expectations report were:

Rowena Crawford, Consultant at Frontier Economics & Report Author
Stephen Evans, Chief Executive at The Learning & Work Institute
Nigel Peaple at The Pensions and Lifelong Saving Association

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