The State Pension has emerged as a key factor behind whether people feel good or bad about their future, according to a new index tracking the nation’s level of confidence in pensions.
More than half (51%) of Brits feel negative about their retirement outlook, according to the newly launched Pension Confidence Index, from leading online pension provider PensionBee.
Among those over 55, not trusting the Government to maintain a decent State Pension emerged as a key reason for feeling negative about their pension outlook; while being entitled to the full State Pension was the number one reason older people who are positive gave for feeling this way.
For younger workers who are feeling positive about their pension outlook, confidence that the State Pension will form part of retirement income was also a top-three reason for feeling positive.
Finding out how much State Pension someone might be entitled to emerged as a top three ‘pension action’ adults of all ages plan to take in the next year.
The index offers a quarterly measure of the mood of the nation when it comes to pensions, and is a survey of 2,000 people, with half of respondents under age 55 (the age people can access their private pensions) and half over 55, highlighting:
how retirement confidence is changing, and;
the main reasons people feel either positive or negative about their pension.
Key findings for under 55s:
Under 55s are more likely to feel negative than positive about their pension outlook, with 51% of 18-54 year olds saying they feel negative, compared with 42% saying they felt positive.
Positivity has declined compared with a year ago: almost one third (32%) of under 55s said they felt less positive, while almost one fifth (19%) said they felt more positive than in 2022.
The top reasons for feeling positive were: ‘my employer contributions are relatively good’ (29%); ‘my personal contributions are relatively good’ (20%) and ‘I’m confident that the State Pension will form part of my retirement income’ (19%).
The top reasons for feeling negative were: ‘I’m worried that my costs will be high in retirement’ (29%); ‘I can’t afford to contribute enough’ (28%) and ‘I think my pension pot is small’ (28%).
Key findings for over 55s:
A similar proportion of over 55s feel negative about their pension outlook, with 50% of over 55-year olds saying they felt negative, compared with 45% saying they felt positive. Over 55s were more likely to report feeling less positive than a year ago (34%), with fewer (15%) saying they felt more positive.
The top reasons that over 55s felt positive were: ‘I am entitled to the full state pension’ (39%); ‘I am on track for a moderate retirement (14%) and ‘I am already enjoying a moderate retirement’ (13%).
The top reasons that over 55s felt negative were: ‘I am worried about the effects of inflation on my living standards’ (26%); ‘I wish I had saved more for retirement’ (23%); and ‘I don’t trust the Government to maintain a decent state pension’ (22%).
Pension actions planned
For those in the working age bracket, the top three pension actions for the near future included increasing pension contributions (29%), using calculators and tools to see how much to save (21%) and finding out how much State Pension support they could get and when (17%).
Meanwhile, those nearing or in retirement were most likely to find out about how much State Pension they can get and when (17%); change plans to reduce costs (13%) and research the best way to minimise tax on their pension (9%). Only a small proportion (3%) of future or current retirees were considering purchasing an annuity in 2024, despite a growing interest in annuities in recent months.
Retirement outlook by age
More than half of 18-24 year olds (58%) said they felt positive about their retirement outlook, however, negative sentiment rose sharply from age 25 onwards. Almost a quarter (21%) of 25-54 year olds admitted feeling ‘very negative’ about their retirement outlook in 2023.
More than half (55%) of those nearing State Pension age (55-64) said they felt negative about their retirement prospects. However, there was a favourable shift in sentiment for those aged 65 and above, with over half of this group (52%) feeling positive. This dramatic, positive shift in sentiment among those likely to be retired already indicates that the experience of being retired may not be as bad financially as they had feared. It might also be down to the greater likelihood of the current retired generation having relatively generous defined benefit pensions, or lower living and housing costs.
Retirement outlook by gender
Across all working age groups, male savers were twice as likely to report feeling ‘very positive’ about their pensions, compared to their female counterparts (on average 19% compared to 8%). This positive sentiment was most pronounced among male savers aged 18-25, with 31% expressing strong confidence in being on track for retirement.
Conversely, females near or at retirement age were more likely (21%) to hold ‘very negative’ feelings about their pension compared to their male counterparts (15%). This disparity may be partly explained by the persistent gender pension gap in the UK, which tends to widen with age.
Retirement outlook by home ownership and employment status
In general, working age renters (55%) were slightly more likely than homeowners (50%) to feel negative about their pension, with concerns increasing with age (63% of over 55s compared to 46% of under 55s). This may be influenced by rising rents and a decline in home ownership, which may make saving for a pension more challenging.
Meanwhile, on average, self-employed savers under the age of 55 (61%) appeared to be more concerned about their retirement prospects than those of the same age employed by a company (52%), highlighting the unique challenges faced by this group, such as their exclusion from Auto-Enrolment.
Becky O’Connor, Director (VP) Public Affairs at PensionBee, commented: “Britain lacks pension confidence. Concerns about not being able to afford to save and the insufficiency of existing pension provisions to meet living costs for those already in retirement are behind a generally negative mood among Brits about their long-term finances, with renters and the self-employed feeling the most gloomy about their pensions outlook.
Employers and the Government have key roles to play in promoting confidence, by offering good contributions to workplace pensions and by maintaining state support for retirement in the form of a decent State Pension. The State Pension emerged as a key cause of a lack of confidence in people’s retirement outlook - it’s clear that anything the Government does to change the State Pension, whether that’s reforming the triple lock or increasing the entitlement age, could have a big impact on people’s confidence in the future.
The good news is some people are planning to take action in the next 12 months - checking their State Pension entitlement, increasing contributions for those still working and minimising tax for those in retirement.
We encourage anyone feeling down about their pension to take small actions, like using a tool or calculator to work out how they are doing, as we head into the new year.”
Please find our Appendix, which includes tables with our full data breakdown here.