Press coverage: Unlucky generation face risk of poor retirement
Workers in the UK labour market face far greater financial risks in retirement than their predecessors and are less well-equipped to deal with negative consequences.
David Hume Institute in The Times
26th September 2022
Successive policy decisions by Government and employers have created an “unlucky generation” of workers in the UK labour market, who face far greater financial risks in retirement than their predecessors and are less well-equipped to deal with negative consequences.
Less than half (45%) of 1,000 people surveyed across Scotland recognised or understood the increased complexity of the choices about how to invest and when to access their pension pots, nor how this could affect their lives.
The survey also suggests that younger workers and those from lower socio-economic backgrounds are potentially most at risk from investments underperforming. Just three in ten (31%) 16-34 year-olds were aware of the amount of financial risk people have to manage in their lives as a result of fewer employers offering final salary (defined benefit) pensions. This is compared to 60% awareness in the 55-64 age group.
There was also a split between social groups, with only 37% of C2DE workers saying they understood these risks. This compares to half (50%) of more affluent ABC1 workers acknowledging the choices involved.
Yet while the increase of risks people face is the result of deliberate policy decisions by Government and employers to encourage more individual consumer choice in the pension market, the survey suggests most people still expect Government to safeguard their wellbeing if things go wrong.
Over half (52%) of people surveyed said that Government ought to be “entirely” responsible for ensuring that everyone, including vulnerable people, has a living income and decent standard of living in retirement. Only 23% placed that responsibility entirely on individuals.
Shelagh Young is one of the authors of the report, The Great Risk Transfer, which exposes the increasing burden of risk that is falling on the individual. She commented:
“Despite the fact that a majority of people clearly expect Government to take responsibility for making sure retirement incomes are sufficient, comparatively few understand that Government expects them to live by their own choices – even if, as in the case of pensions, there is now a far higher chance that things will go wrong.
“Our research showed that many over 50s often described themselves as being part of a ‘lucky’ generation that has benefitted from better access to affordable housing and better returns from employer protected pensions, contrasting an ‘unlucky’ cohort in their mid-forties and younger facing considerable risk to retirement income.
“As the cost-of-living crisis ramps up and financial pressures for workers grow, we need to see ministers working closely with businesses on steps to help people de-risk retirement. Failure to do so may result in the millions of those who miss out squarely blaming government for a failure to safeguard their future livelihoods”.
ENDS
The Great Risk Transfer was commissioned by the Institute and Faculty of Actuaries. It will be published on 28 September 2022 with an online debate hosted by Susan Murray, Director of David Hume Institute held on 3 October. Watch the recording of the event below.