47 per cent of workers ‘do not know how to plan for retirement’

The study reveals fewer than one in three people (28 per cent) feel secure in their knowledge of how to manage their pension as they get closer to retiring. Just 27 per cent are confident they know what a "good" amount is to have in their pension for someone their age.

Women are almost twice as likely as men to feel completely "on the back foot" (21 per cent versus 12 per cent) with preparing and saving for retirement. They are also more than twice as likely as men to be in the dark about how to manage their pension as they get closer to retirement (34 per cent versus 14 per cent).

The findings come despite nearly 10 years of auto-enrolment encouraging more people to save via the workplace, backed by guidance services like PensionWise to help them understand their pension options. Aviva’s research shows accelerating change and ambiguity have left many people confused about their future.

The number of people in work who say they know how much they need to save for retirement has dropped sharply since before the pandemic, from 61 per cent in February 2020 to 52 per cent now. More than two in five (42 per cent) admit they have not even started thinking about retirement yet, including 39 per cent of workers in "Gen X" aged 40-54 who have put any thought of retirement to the back of their minds.

As a result, nearly three in four of "Gen X" (74 per cent) feel like they will have to work much longer until they retire, rising to 79 per cent of "Gen Y" aged 25 to 39.

Aviva’s research pinpoints the workplace as a key battleground in the national effort to address the retirement savings gap.

It shows nearly three in five (59 per cent) employees would be open to receiving pension planning support at work to help them identify how much they need to pay into their pension to live well once they retire.

Almost one in four (23 per cent) adults would like to be offered support on how to manage their pension as they approach retirement, while one in five (20 per cent) would like more support on what type of pensions there are.

More than half (51 per cent) also believe they will need support from their employer to create an easier transition into retirement, such as flexible or part-time working. Two in five (41 per cent) are worried about being able to retire when they want to – significantly more than the 31 per cent who are worried about how much they currently get paid.

Mary Harper, managing director of Aviva Financial Advice, said: “It’s very easy to put thoughts about later life to the back of your mind, but investing time in thinking and planning ahead can make a world of difference to your options.

"Although you may have to pay for it, evidence suggests that people who access financial advice are, on average, tens of thousands of pounds better off in the long-term, but it’s not always something people feel they can relate to, benefit from or feel is designed for people like them.

“However, whether people are working longer out of choice or necessity, many are crying out for greater help from their employers to help them manage their finances ahead of retirement. Auto-enrolment has been a huge success in giving more people access to pensions, but it’s what you do with your pension that really counts.

“It’s important that people have sufficient financial knowledge to make the right decisions for them at the right time. Our research shows that employers have a key role to play in filling the pensions preparedness vacuum. Access to a combination of information, guidance and advice via the workplace can help people make the most of their money for the long-term.”

To help address the issue, Aviva is calling for a Living Pension accreditation to be created – the pension equivalent to the living wage – to help businesses ensure their workplace pension supports a minimum standard of living in retirement.

Laura Stewart-Smith, head of workplace savings and retirement at Aviva, said: “Our findings show there is a major vacuum in retirement preparedness which businesses can help to fill.

"We’ve seen the lines between home and work become blurred beyond recognition for many people during the pandemic. As we look ahead to the future, employers will play a key role in helping people to manage their workplace pension to their best advantage.

“We are calling for a Living Pension accreditation to help give people confidence that they work for an employer who will help provide for their future wellbeing, as well as their immediate needs.

"When it comes to saving, you need to understand where you’re starting from, where you want to get to and the actions you need to take to get there. A more personal approach to financial education at work can give more people the opportunity and support they need to take positive steps to improve their financial wellbeing.”