Savings shortfall puts life goals on hold
Just over two in five (42%) adults in Scotland say that a lack of savings prevents them from achieving life goals now, new research from Zurich UK has found.
Based on a survey of people across the UK, the study is a benchmark of how financially confident people are they will be able to fulfil their aspirations for life now and in the future.
The study, which aims to highlight the savings gap in the UK, found that just under three quarters (74%) of Scots under 65 said they have goals they want to achieve when aged 65 or over, such as travelling more often or for longer periods of time, taking up new hobbies or being a position to financially support their own children, grandchildren or stepchildren. Yet 47% believe a savings shortfall will prevent them from realising this.
Given the latest UK household savings ratio is also at 5.9%, only slightly up on the all-time low of 4.6%, this also demonstrates that lack of savings is an overall block. When it comes to considering life aged 65 or over, people are optimistic with nearly half (43%) expecting to live longer than the actual life expectancy.
Despite recognition of the importance of saving in achieving aspirations, people under the age of 65 are not actively saving for when they are 65 and over. Just under a third (31%) of those who are yet to retire do not have either a private or workplace pension. While 13% of all adults in Scotland have no savings or investments.
While over half (53%) of those pre-retirement hold private or workplace pensions, of those just one in five (20%) said they felt confident they knew how much they should be saving into their pension every month to comfortably afford the standard of living they expect from their retirement.
The study also found that on average, those with a workplace pension in Scotland save 6.95% of their salary into their pension – slightly less than the national average of 7.25%.
To secure enough money to live comfortably in retirement, a commonly cited rule of thumb is that total contributions from both employer and employee are approximately half your age as a percentage of salary. For example, a 20-year-old should be saving 10% of their income.
Anne Torry, Head of Zurich UK Life, commented: “It is positive that people are so optimistic about their long term future and have clear goals they want to achieve after the age of 65, from travelling the world to starting a new hobby or financially supporting loved ones. Yet, when it comes to realising goals, whether in the long or immediate term, money is a clear brake on ambition with a lack of savings fundamental to realising aspirations. Despite realising this, our research shows just half of non-retired people have pension provision. This simply will not be enough to support the aspirations that people have.
“More has to be done to inspire people to take action and start saving. Small steps such as reviewing everyday spending to realise a saving that can be used to increase monthly pension contributions will have a huge impact over the long term, as will taking full advantage of support within the workplace and contributions from employers. In a low interest rate environment, a professional adviser can also help to create a plan and make the most of savings. The earlier action is taken, the more likely it is that your savings will be sufficient to realise your aspirations today and in the future.”
To help consumers prepare for the future and achieve the lifestyle they want in retirement, Zurich has launched ‘Zurich FutureYou’, including tools to help people imagine, plan and manage their own financial well-being. Zurich FutureYou is designed to support people along their financial journey with interactive and methods of planning that are entirely personalised, to ensure engagement with savings matches individual aspirations.
For more information on Zurich FutureYou, visit: https://futureyou.zurich.co.uk/welcome