An increasing number of full-time employees fear they will never be able to afford retirement due to the rising cost of living.

Recent figures from WEALTH at work, specialists in financial wellbeing and retirement, reveal that 39% of workers believe they will never be able to afford to stop working, up from 33% last year.

The data highlights that those aged 35-44 are the most likely to believe they will never be able to retire, with nearly half (46%) of workers in this age group expressing this concern. Additionally, almost a third (32%) of workers now anticipate delaying their retirement, a significant increase from 21% the previous year.

Impact on Retirement Comfort

Eight in ten workers (81%) are worried that rising costs will lead to a less comfortable retirement due to a shortfall in savings. The same percentage (81%) fear they will have to work longer to compensate for this shortfall. Furthermore, 41% of workers feel unsupported by their workplace in understanding their finances, and 54% would seek guidance about their pension from unqualified sources like family and friends, or no one at all. Only 14% would consult their employer.
Expert Commentary

Jonathan Watts-Lay, Director of WEALTH at work, comments, “Many are concerned if they will ever be able to afford to retire or believe that they will have to delay their retirement, but the research has found that the most concerned are people aged 35 to 44. Most of this group will not have benefited from a full working life of automatic enrolment and are less likely to reach retirement with generous defined benefit pensions than some older generations. Pre auto-enrolment, many in this age group may not have saved into pensions at all, missing years of contributions and growth.”

Watts-Lay emphasises the importance of preparing finances for later life, saying, “It may not seem important now but preparing your finances for later life is one of the most important things someone can do. Many don’t realise the significant difference a small increase to their pension savings can make. This is especially true when an employer matches any additional contributions.”

Importance of Financial Preparation

“Making small changes such as setting a household budget, shopping around, and not auto-renewing on things like car insurance, as well as utilising workplace benefits like discount schemes, really can make a huge difference.”

For those nearing retirement, Watts-Lay advises creating a detailed financial plan.

“Those who are approaching retirement should work out a financial plan by carefully looking at what pensions, savings, and investments they have. There are 2.8 million lost pension pots sitting unclaimed because they’ve been lost or forgotten about, so it’s important to track them all down before working out what income you’ll have. If people have several pensions and struggle to keep track of them all, it might make sense to consolidate them.

“Once someone has a true picture of their finances, they’ll need to calculate how much they will need in retirement. This can be difficult to estimate, but the Pensions and Lifetime Savings Association (PLSA) provides some guidance.”
Financial Targets for Retirement

According to the PLSA, a single person will need about £14,400 a year for a minimum standard of living, £31,300 a year for a moderate standard of living, and £43,100 a year for a comfortable standard of living. For couples, these figures are £22,400, £34,100, and £59,000, respectively.

Watts-Lay suggests that those worried about insufficient savings consider delaying retirement or working part-time. “If someone is worried that they haven’t saved enough, it may be worth delaying retirement or continuing to work part-time. This would enable them to make more pension contributions and take advantage of tax relief and employer contributions for longer.”

Seeking Qualified Financial Guidance

Watts-Lay stresses the importance of seeking qualified financial guidance:

“As the research shows, it is very common for people to turn to their friends and family for guidance on their pensions, but they may not be the most qualified source. Many leading employers recognise the need to help their employees improve the way they manage their money and better prepare for later life. Financial wellbeing support in the workplace can include financial education, guidance, and access to savings vehicles such as ISAs or Share Plans, as well as pension consolidation services.”

He concludes, “Giving people the opportunity to understand ways to save money, learn about budgeting, and how to boost savings and prepare for retirement can make a huge difference to their finances. It is important people speak to their employer to find out what help is available.”
Supporting Employees for a Secure Financial Future.