Some 18 million adults in the UK have made no provision for their retirement and are likely to spend their old age living in poverty, according to a new report from Mintel.
The survey of attitudes to pension products and savings says that many of these adults will be dependent on the state pension, which is low and poised to fall further. Reliance on the welfare state is likely to push those with no retirement provision below the poverty line.
The average British consumer has become increasingly knowledgeable about saving options and some are now looking outside pensions and considering options such as Individual Savings Accounts (ISAs).
The main form of retirement provision, other than the state pension, is the occupational pension scheme, held by 14 per cent of the survey sample.
Mintel research shows that one-fifth of non-retired respondents have a personal pension.
Thirty per cent of non-retirees claim to have no pension provision at all and they may have to rely on the state for their retirement income. These consumers also represent a key target market for personal pensions.
Pension ownership is concentrated among 25- to 54-year-olds in more affluent socio-economic groups. Only six per cent of C2DE consumers has a personal pension.
Some 71 per cent of retirees rely on the state for their retirement income. For a significant number, the state pension will be supplemented by income from an occupational pension or other investments. About half of retirees receive income from occupational pension schemes; 13 per cent also receive income from other investments held.
Above all, not having sufficient retirement funds and not being able to afford to retire are of major concern to a high proportion of adults.
Poor advice and pensions mis-selling concerned 17 per cent of adults and 21 per cent of respondents owning a personal pension. This shows that the mis-selling scandals are undoubtedly still hitting the industry.
These concerns are likely to have been heightened by the Financial Services Authority (FSA) advertising urging people to have their personal pensions reviewed.
Forty per cent of respondents owning a personal pension were concerned about issues relating to the performance of their pension funds.
Looking in general at attitudes to saving, last September 51 per cent of respondents, 24.5 million adults, agreed that saving was one of their most important spending priorities.
This has decreased from the 58 per cent who, in 1995, said that saving was a priority. It is likely that in 1995, the economy’s recovery from recession contributed to the higher desire to save.
Changes in saving preferences are not proportionate to short, medium and long-term saving. Long-term saving in pensions and endowments has remained steady in the past five years.
In 1999, it was a top priority for 19 per cent of respondents. The fall in saving priorities occurs among short-term savers, to whom saving more money in a bank or building society was a priority to 44 per cent of the sample in 1995.
By 1999, this had fallen to 36 per cent and it is likely that rising confidence has, at least for short-term saving, shifted the priorities from saving to consumption.
Despite awareness of the importance of retirement planning, 37 per cent of consumers are making no provisions for their own retirement.
In the face of an ageing and longer-living population, the Government is keen to encourage as many people as possible to plan for their own retirement, and has developed the stakeholder pension with this in mind. But there is uncertainty about its acceptance.
Some independent financial advisers doubt whether simply offering a more accessible retirement product will do much to increase ownership levels, believing that pensions need to be actively sold.
Indeed, many pension providers are also unsure as to whether or not they wish to compete in the low-margin stakeholder market.
It is conceivable that, if the stakeholder initiative does little to decrease the numbers without a pension, then the Government will be forced to push for some form of compulsions. Although this policy would not be a popular one for it to pursue, it has not been ruled out by the Government.
Factfile is edited by Julia Day. Sarah Watkins, Mintel financial analyst, carried out the report.