The number of people earning between £50,001 and £60,000 taking retirement advice has jumped from 18 to 56 per cent, compared to those earning less than £50,000.
A study of 2,000 adults commissioned by Octopus Investments last month suggests that people’s approach to retirement planning dramatically changes once they cross the £50,000 threshold.
It found the UK is in danger of creating a ‘two-tier’ retirement system with clear winners and losers.
This includes a step change in people’s confidence, expectations and behaviours when it comes to planning for their future for those earning between £50,001 and £60,000 compared to those earning less than £50,000.
According to the research, 14 per cent of people earning £40,001 to £50,000 expect to hit the pensions lifetime allowance limit, jumping to 63 per cent when looking at those earning £50,001 to £60,000.
Pension reforms have made one in four people nearing retirement less confident that their pension will give them a decent retirement income, the research found.
Meanwhile, the raft of recent pension changes, far from giving people the sense of ‘freedom’ over their financial planning, has dented the confidence of a quarter of Britons nearing retirement.
Income bracket | £10,001 - £20,000 | £20,001 - £30,000 | £30,001 - £40,000 | £40,001 - £50,000 | £50,001 - £60,000 |
Percentage of people who are more confident that their pension will deliver a decent retirement income, given recent reforms | 8% | 14% | 18% | 19% | 46% |
Percentage of people who have taken financial advice about their retirement planning | 21% | 20% | 22% | 22% | 56% |
Percentage of people who expect to hit the pension lifetime allowance limit | 6% | 10% | 10% | 14% | 63% |
Percentage of people who use or plan to use in the next year Venture Capital Trusts (VCTs) for retirement planning | 1% | 0% | 2% | 6% | 38% |
Percentage of people who use or plan to use in the next year Stocks and Shares ISAs for retirement planning | 10% | 12% | 23% | 21% | 44% |
Source: Opinium Research, 22-25 January 2016
Simon Rogerson, chief executive of Octopus Investments, said: “While one might expect that high net worth individuals would plan differently for retirement than those on an average income, this significant jump in confidence, advice and action between those earning up to £50,000 and those earning a few thousand more in the next income bracket is deeply concerning.
“Against this backdrop, people could be sleepwalking into a financial crisis in their later years. This would be a real shame as there is now the opportunity for everyone to take control of their financial future.
“Investment into VCTs is a great example of this shift. We see the sharp uptick in interest in VCTs for those earning over £50,000 but just looking at our VCT offerings there is a minimum investment of £5,000, meaning they may be more accessible than people think.”
David Trenner, technical director at Intelligent Pensions, said: “VCTs - and we have to give the credit to Octopus which has done a lot of work on them - have become more mainstream than when they first came about.
“The problem is you have still got some VCTs which are going to be higher risk than people buying them realise.”
