Every year the Drewberry Wealth and Protection Survey of 2,000 British workers reveals something new about the financial provision of the average Briton, their preferences and, very often, the illusions under which many still labour.
One of the clearest findings in this year’s survey was that, when it comes to retirement provision, despite the best efforts of our industry, the chasm between the ‘haves’ and the ‘have-nots’ is growing ever wider.
Our findings also highlighted that, increasingly, it is the self-employed who are most at risk of retirement paucity. We also found that, try as we might, advisers are still failing to bridge the gap with only a tiny percentage of respondents willing to pay the kind of fees that good-quality advice now requires.
Marching toward oblivion
When surveyed, we found one-fifth of Britons (19.7%) effectively had no idea of how they were going to fund a pension, while a similar percentage (22%) think they will never be financially secure enough to retire. In all, 58% of Britons do not expect to be able to retire until after the age of 65, if at all.
According to our findings, however, it is the self-employed who are really at the sharp end. Only a quarter (27.7%) of the self-employed we surveyed thought they would be able to retire by age 65. Almost 46% said they could not see how they would ever be able to afford retirement, compared with only 19% of employed respondents who said the same thing.
That said, our analysis suggests that while generally more optimistic about retirement, a great many full-time employees are probably overestimating the value of their current pension arrangements. For one thing, more than a fifth of respondents (20.25%) had no clue what their current pension might be worth as they had never taken the time to find out. At the same time, 27% of those surveyed stated they believed saving up to 5% of their salary into a pension would suffice to fund a comfortable retirement.
‘Old think’ still prevalent
Despite the progress afforded by auto-enrolment and the arrival of the pension freedoms last year, far too few Britons have really embraced the opportunity. Our survey found far too many are sticking to outdated products such as cash ISAs or deposit accounts as a way to ‘save for retirement’.
In total, 40% of respondents said they intended to use bank savings as a way to fund their retirement despite the dearth of UK interest rates. Indeed, some 44% of Britons still hold cash ISAs compared with only 13% who say they own a stocks and shares ISA.
Similarly, almost 24% of Britons expect their property investments to help subsidise their retirement. Almost 8% of respondents thought their buy-to-let investments would deliver additional income in retirement – though twice as many believed the equity in their home would do the same thing.
This is one of this year’s most worrying findings as it suggests UK property prices have created a false sense of affluence for many UK homeowners. In reality, the opportunity to capitalise on this newfound ‘wealth’ is elusive at best. Based on current property prices, we estimate a retired couple who are actually in a position to ‘downsize’ will be lucky to clear £100,000 after stamp duty, transaction fees and moving costs.
This may be enough to help bail out a leaky pension plan but it is a long way from being a life changing amount for a couple at the start of a long retirement.
Chicken and egg
From our perspective, it is difficult not to draw a direct line between the pension fallacies that are still so much in evidence among the British public and our failure, as a profession, to embed the value of professional financial advice in the mind of the public.
In all, just 42% of respondents who had previously received advice from a UK adviser thought they were better off as a result, while 75% of all respondents reckoned ‘life changing’ pension advice was worth £500 or less. Only 1.5% of our 2,000 respondents believed that it was worth paying £3,000 or more for good pension advice.
Both in saving for retirement and in persuading today’s workers decent pension advice will pay for itself in the long run, the country and the advice profession clearly have a long way to go.
Tom Conner is a director of Drewberry
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