Interactive Investor

The Great British Retirement Survey 2021: out now

13th October 2021 14:08

Jemma Jackson from interactive investor

Stir-crazy and stressed – retiring Britons desperate for holiday lift-off but worried ‘Dick Turpin’ chancellor will hijack pension dreams.

  • interactive investor publishes Great British Retirement Survey 2021.
  • Britain’s workers' dream of a retirement of travel and sun, but growing number suffer pension nightmares
  • Faith in the social contract in tatters as Britons of all age fear chancellor will raid pensions and break more promises
  • Young people doubt the state pension will exist for them by the time they retire and are more focused on getting on the housing ladder than holiday flights
  • Investors feeling the flip-side of pensions freedom and pensions complexity
  • Cost-conscious savers taking control of investments and increasingly choosing ethical options
  • Scam victim costs rising.

Britain’s stir-crazy workers are desperately dreaming of a retirement of European city breaks and sunny beaches but having nightmares that their plans will be brought crashing to earth with a bang by falling markets and a meddling chancellor playing ‘Dick Turpin’ with pensions.

These are the key findings of this year’s Great British Retirement Survey. The survey, by the UK’s second-biggest investment platform for DIY investors, interactive investor, is the biggest annual study of its kind, drawing on the experiences of more than 10,000 respondents answering over 100 detailed questions.

Never has the thought of retirement seemed rosier for working Britons who have experienced two years of the Covid pandemic and months of lockdown. Almost half (49%, up 14 percentage points on last year), see it as a time of financial freedom and independence and one in three (29% versus 22% last year), put travel as their top priority when they stop working.

Despite dreams of freedom, nightmares about financing retirement are also on the rise. Nearly half of all respondents (47% retired and 49% non-retired) worry about falls in the value of shares, the rising costs of living (34% retired and 42% non-retired) and the risk of running out of money in retirement (27% retired and 41% non-retired).

Broken trust

One of the biggest concerns is what the chancellor will do next. Tax ranked as a top-three financial concern for 30% of non-retired respondents and 25% of retired respondents. Nothing stirred the ire of respondents more than the Lifetime Allowance.

  • “I’m penalised by the superior performance of my SIPP by the LTA, and it’s not right.”
  • “The possibility of the LTA being further reduced as inflation rises is mad.”

Trust in the government to fulfil its pensions promises is also falling, not helped by the lack of clarity over what state pension individuals will receive. One in five (20%) of our non-retired respondents did not know whether they would receive any state pension. This uncertainty rose to 26% among people in their thirties and 53% of people aged 24 to 29.

  • “I'm not sure there will even be a state pension by the time I get to pension age. I hope there is, but I just don't know.”

Retirement is a distant dream for younger generations. The priority is getting on the housing ladder, rather than aeroplanes. Young people are relying on parents and grandparents more than ever this year – 60% of our retired respondents with children said they had helped them purchase a home, usually by gifting or loaning money towards a deposit. Meanwhile, 37% of our non-retired parents said the same, with 5% of these acting as guarantors for loans.

Moira O’Neill, Head of Personal Finance, interactive investor says: “Saving into pensions is an act of faith – it’s something we’re encouraged to do all our working lives. So it’s not surprising that people’s faith is undermined and their tolerance stretched when the chancellor plays Dick Turpin with pensions. Many engaged long-term investors see the Lifetime Allowance as highway robbery and with the Treasury repeatedly signalling more tax attacks on pensions, they get even angrier.”

She adds: “It’s a measure of how little people trust the government around pensions that younger respondents are questioning whether they’ll even get a state pension. And this comes at the same time as they’re finding it harder than ever to start the journey of home ownership. The increase in parents and grandparents helping out may be a consequence of the stamp duty holiday encouraging people to bring forward house-buying plans, but it is something we will watch carefully after raising serious concerns last year about the financial stability of the Bank of Mum and Dad.”

Cry freedom

Six years on from the introduction of pension freedoms, investors are beginning to feel the drawbacks of drawdown. Respondents highlighted the complexity involved in managing investments for and in retirement. They compared the relative simplicity of the final salary pension schemes of the past with the pension options available today.

  • “There are very few final salary pensions left, and people are more likely to have multiple jobs throughout their life – making pension management more complicated.”
  • “Everything is more complicated today. There are no safe options.”
  • “There is far more flexibility both in the job market and regarding financial products. However, this complexity is a double-edged sword.”

The challenge is made harder by the growing number of pension pots that savers accrue as they switch jobs and careers more often. Two-thirds (66%) of non-retired respondents had more than one pension pot, and 15% of these had four or more. One in 17 (6%) of non-retired respondents did not know how many pension pots they had, indicating a significant risk that they could lose track of parts of their retirement income. The Pensions Dashboard cannot come soon enough.

Investors are also grappling with the responsibilities and challenges of investing successfully to ensure a secure retirement, with many regretting not taking enough investment risk earlier in their lives. Among non-retired savers - 39% said they wished they had had understood more about the benefits of taking a higher-risk approach with their pensions when younger. 

  • I was too conservative in my choice of investment, choosing income over growth.”
  • “I regret that I was financially illiterate and overly risk-averse.”

Becky O’Connor, Head of Pensions and saving, interactive investor, says: “We’re seeing a flip-side to pension freedoms. It’s good that people have the power to choose and manage their own pension investments, but that requires more financial education – at school and beyond – and better guidance and tools. It would also help if the government could avoid further complexity and changes to pension tax charges. One of the reasons people hate the Lifetime Allowance so much is not just that it’s seen as an unfair tax on investment growth, but that it adds yet another layer of complexity to retirement planning decisions that people can do without.”

Taking control and testing ethical options

A positive theme to emerge from this year’s survey was the number of people who are aware of how their pension is invested and say they have taken their values into consideration when investing it – to more than a third of respondents – 35%, compared with 28% last year.

The proportion of people unaware of where their pension was invested has fallen from 53% to 41% this year.

Becky O’Connor says: “Pensions have been the focus point for campaign work on the impact that moving to more ethical and sustainable investments can make. Meanwhile, the twin forces of climate change and the pandemic have given people the time to research and make changes to their longer-term finances. These factors have come together to improve awareness of the investments underlying pensions as well as the proportion of people aligning their money with their morals.”

Scams hitting harder

Slightly fewer of this year’s respondents reported being a victim of a financial scam (9% versus 13% last year), which we found surprising. However, only 34% of those who fell victim had received their money back – a drop of 9% points compared to last year’s survey. 56% had not had their money returned, and 11% were still waiting.

Moira O’Neill says: “It would be concerning if the introduction of new measures to stop fraud resulted in the burden of blame shifting to innocent victims.”

Policy change

Among the policy recommendations made comes one from a respondent – to pool the Lifetime Allowance limits for couples. Becky O’Connor says: “This would mirror the joint treatment of inheritance tax allowances for residential property. We like this idea, and it would acknowledge that for many older couples, a pension for two has been built up in a sole name.”

interactive investor is encouraging providers not to stop at Investment Pathways and to develop easier-to-understand products that can help people cope with the complexities of drawdown. The platform is calling for the government, educators and the financial services industry to better equip investors with the skills to safely navigate the challenges of retirement funding.

Notes to editors

The 2021 interactive investor Great British Retirement Survey was conducted between March and July 2021, and more than 10,000 UK adults responded. CoreData Research conducted the research for ii, who are a global market research consultancy.

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