Just under half of individuals (46 per cent) believe the state pension will exist by the time those that are currently in their 20s come to retire, according to research by Interactive Investor.
In its Great British Retirement Survey 2023, published today (October 19), of those who thought the state pension would survive, 9 per cent said it would almost certainly survive, 14 per cent said it would be more than likely and 22 per cent said it would probably still exist.
However, nearly one in three (31 per cent) said it would not exist at all.
Young people themselves were slightly more optimistic, with 56 per cent thinking it would still exist.
Middle aged workers had the bleakest outlook with only 37 per cent of 41-55 year olds believing the state pension will still exist for today’s young people.
Those who said the state pension would still exist also said it would apply at a considerably older age than currently, citing an average age of 71.
Around half (51 per cent) said it would first apply between the ages of 70 and 74, with 16 per cent thinking it would not become available until the age of 75 or older.
Comfortable retirement
Richard Wilson, chief executive officer at Interactive Investor, said that while a comfortable retirement increasingly rests on the individual, "the impulse to pass on wealth and help those we love is palpable".
He explained that three pressing concerns dominate: the rising cost of living, running out of money, and not saving enough.
“At a policy level, government may need to look again at contribution levels, and while the state pension age is emotive and difficult, regional health inequalities should be part of the conversation,” he said.
“We are also crying out for a joined up financial education strategy in the UK and we want to see collaboration between HM Treasury, Department of Education and FCA.
“Good pension outcomes rely on three things: state pension to provide a basic income, combined with workplace and private pensions, boosted by pension tax relief. To rebuild confidence and energise the nations pensions savings, the integrity of those three things remains key in an ever-changing world.”
Mind the pension gap
The research reported that women have significantly lower pension provision than men, with them being 14 percentage points less likely to have any pension pots.
They expect £8,000 less in pension income (£17,200, versus men’s expectation of £25,200).
Women’s pension assets are affected by the fact that women are more likely than men to spend time outside the labour market or be in part-time employment to undertake unpaid caring for young children or relatives.
Within Interactive Investor’s data, 28 per cent of women do not have a pension pot compared to 18 per cent of men.
Overall, women also have much lower expectations for their annual retirement income – £17,200 for women versus £25,200 for men.
Interactive Investor said it was shocking to find that 67 per cent of women aged 41-55 believe they will never retire.
Speaking at the launch event, Alice Guy, head of pensions and savings at Interactive Investor, said: ‘It probably won't be any surprise to see some of these groups, people who are expecting lower incomes in retirement and have less pension income.
“With women, 78 per cent of those surveyed said they had a pension, but that compares with 86 per cent of men saying that they had a pension of some sort.”
Additionally, there is also a 12 percentage point gap in pension participation between people who have a disability and those who do not – 70 per cent versus 82 per cent.
Only 58 per cent of those who are disabled and are most affected in their day-to-day lives have a pension pot. Pension expectations are lower as well.
The self-employed
Looking at the self-employed, three quarters (76%) are paying nothing into a pension, and 38 per cent don’t have a pension at all.
Guy said: “You might be surprised that the self employed one is quite so low because among the self employed cohort 56 per cent said that they had a pension so in other words, 44 per cent are saying they don't have any sort of pension outside of the state pension.”
Part-time work reduces pension income expectations by £9,100 compared with full-time workers.
The expected income of those working full-time is £25,700, but for those working part-time it is £16,600.
According to government labour market statistics, there were 4.4mn people working in a self-employed capacity between March and May 2023.
Although still below the peak of 5mn before the pandemic, this represented a year-on-year rise of 3.5 per cent.
Half (56 per cent) of self-employed people surveyed for this year’s survey reported having at least one pension pot but only 18 per cent said they were actively saving into a private pension or self invested personal pension.
Guy added: “We also asked where do you expect to get your income from in retirement and only one in five of self employed people expect their income to come from a workplace pension in retirement.
“That's quite interesting because we know that self employed people will often dip in and out of the workplace. They won't always be self employed. They'll be doing work in the workplace and out of the workplace, but only one in five are expecting that income to come from their workplace pension.”
sonia.rach@ft.com
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