Personal PensionNov 18 2015

Regular saving, not income, determines retirement confidence

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Regular saving, not income, determines retirement confidence

Regular saving, not income, is the key driver of confidence in future retirement, according to a study by Axa Life Invest.

The firm’s annual retirement confidence index found that the wealthiest people in the UK are not necessarily the most confidence in their future retirement, with confidence tipping only slightly in favour of higher incomes.

The results were based upon an online study of over 1,000 non-retired UK adults who are over 50 years old.

Actively saving for retirement generates confidence and creates a positive psychological impact, regardless of the amount being saved, Axa Life said. The most confident UK adults are those approaching retirement age, based on a series of financial and non-traditional metrics proven to influence retirement confidence.

On average, higher income earners are only six per cent more confident than middle income earners, at 62 per cent compared to 56 per cent confident, respectively.

Almost half of those with a household income of £30,000-£40,000 are defined as ‘confidents’ - people who are confident now, with no change in confidence over the past year - or ‘champions’ - those who are confident now and increasing in confidence over the past year.

This proportion rises to 58 per cent for those with a household income of £50,000-£60,000 a year.

Overall, a household income of £39,091 a year appears to be the ‘tipping point’ for retirement confidence.

Meanwhile, confidence levels rise dramatically the more you save. Only 24 per cent of people who do not save at all can be classed as ‘confidents’ or ‘champions’ when it comes to retirement confidence, but this rises to 37 per cent for those who save £100-£300, 53 per cent for £300-£500 and 57 per cent for over savings of over £500 a month.

Simon Smallcombe, managing director of Axa Life Invest, said: “Contrary to what you would expect, wealth in and of itself is not the key driver of confidence in your future retirement.

“The commonly-held belief that the wealthiest in society are the most secure simply doesn’t stand up under scrutiny, according to our index. This suggests that those who plan for the future and squirrel away consistent savings each month can be just as confident as high earners.”

ruth.gillbe@ft.com