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Advisers say greatest threat to retirement is lack of investor understanding  

  • New research reveals advisers’ deep concern that consumers don’t appreciate the risks of under-saving for retirement – as 75% of UK adults admit they haven’t contributed to their pension beyond auto enrolment. 
  • Under-investment is compounded by advisers’ view that consumer knowledge of pension risk hasn’t improved over the past decade, whilst consumers themselves call for clearer government advice about retirement.  
  • Research also found men more likely to save for later life compared to women who are more focused on making lifestyle changes to boost their life expectancy and improve health. 
New research from VitalityInvest has found just under a third (31%) of Independent Financial Advisors believe consumers failing to save for retirement and a lack of understanding about the risks of under-saving are the biggest threats on the horizon to clients’ accumulation and securing the retirement they want.  

In a poll of 200 advisers, the research also reported concern that clients’ understanding of risk hadn’t improved in the last ten years despite changes to annuities, drawdown and auto enrolment. When asked if they thought people under the age of 40 had become more or less aware of the risks of not saving for retirement, 27% said that their understanding was about the same, while 16% thought consumers where a lot less aware.  

This tallies with the response of consumers in a second set of VitalityInvest research, which found three quarters (74%) of UK adults had never made any contribution to their pension beyond auto enrolment or did not have a pension or retirement savings plan. Consumers also called for clearer government advice about saving for retirement (27%) and said better understanding of the Government’s long-term plans for retirement age (28%) would encourage them to start saving more and earlier for retirement.  

Planning for the future  

The consumer research also exposed some striking differences between men and women’s attitudes toward pension pots and making lifestyle changes to improve health in later life. 

Only 19% of UK women said they had ever made increased contributions to their pension or retirement fund beyond auto-enrolment. This is compared to over a quarter of men (26%) who have made extra or increased contributions to their pension or retirement savings plan. In fact, double the number of men (10%) have actively implemented positive changes to their retirement savings plan after calculating their later life finances compared to women (5%). 

Women were however found to have considered lifestyle changes to allow them to make the most of their retirement. Almost two thirds (62%) of women were found to have made lifestyle changes to increase their life expectancy and improve health in later life. Paradoxically, this increases their chances of living longer, highlighting the need for women to be saving more for retirement.  

This was found to be in stark contrast to men who were 6% less likely to make lifestyle changes that they considered would benefit their health in later life, but (26%) were actively considering the amount of money they would need for their retirement.  

Marcus Rees of Romilly Financial Services said: “There have been a lot of changes to the pension rules and retirement savings allowances over the last ten years which have created additional challenges for advisers and confusion for many clients. The Government constantly moving the goalposts and increasing the regulatory burden has made the job of engaging people much harder. What we need is a period of stability, not more rule changes.” 

Justin Taurog, Deputy CEO of VitalityInvest, said: “The research shows there are some serious concerns from advisers about consumer attitudes toward retirement. Their worries are warranted and it’s shocking to see three quarters of UK adults haven’t contributed to their pension beyond auto-enrolment. There is clearly a role for us as a business, and the industry, along with government to help educate investors about the danger of under-saving for retirement.

Using incentives to tackle this challenge is at the heart of the VitalityInvest model. Our approach is unique in linking health and wealth providing both lifestyle and financial incentives to consumers who adopt Vitality. We believe retirement planning will move increasingly in this direction and more financial professionals should consider this need for their clients.”