Pension confidence on the rise

For the first time in six months, people are feeling more positive than negative about their retirement prospects.

A survey by pension provider PensionBee found that positive pension sentiment has grown considerably in the last three months amid falling inflation and reduced cost of living pressures.

Its Pension Confidence Indicator rose to +22 in March 2024, from -10 in December 2023 and -9 in September 2023.

Pension expectations

Those who felt negative were worried about not saving more, or expressed concern about high living costs in retirement.

People with a more positive outlook said that their regular pension contributions -- or those made by their employer -- were relatively good, or their pension fund was performing well.

Age, sex and expectations about the State Pension were among other factors that affected retirement sentiment:

• Pension confidence was high among younger workers and those near or at retirement, while almost half (47%) of workers aged 44 to 54 felt negative about their pension -- higher than any other age group.
• Women tended to feel less positive than men, particularly in the older age groups where the gender pension gap is widest.
• Those near or at retirement identified the State Pension as a major reason for positive pension sentiment. In contrast, among under 55s the State Pension dropped out of the top three reasons for positive sentiment. Instead, there was a greater emphasis on funding retirement through personal contributions.

Competing financial demands

Becky O'Connor, director of public affairs at PensionBee, said that it was "encouraging" to see a growing sense of pension optimism.

"While it's often assumed that younger individuals feel more confident when it comes to their pension, due to having a longer period to save, this research highlights a nuanced reality," O'Connor added. "Initial zeal for pension savings can give way to competing financial demands during the middle of one's career.

"It appears for many, it's the proximity to retirement and the attainment of financial clarity that reignites this pension confidence later in life. However, it's crucial to acknowledge the persistence of the gender gap in pension confidence.

"These dynamics highlight the multifaceted nature of pension confidence, underscoring the importance of financial planning for all individuals across all stages of life."

How much is in your pension pot?

In a recent survey of high-net-worth individuals by private and commercial bank Arbuthnot Latham, millennials (age 35-44) were the most engaged group when it comes to retirement planning. They are saving the highest amount, on average, and are also the most likely to know the size of their pension pot.

Overall, the average amount that people felt would give them a comfortable retirement was £900,000. Yet only 61% know how much they currently have in their pot.

"Saving for retirement is the bedrock of a financial plan, but our research reveals significant gaps in people's overall understanding of whether their pension savings will support a comfortable retirement, meaning many will miss their target retirement age or may be forced to downgrade their lifestyle expectations," said Eren Osman, managing director of wealth management at Arbuthnot Latham.