What are the public attitudes towards saving for retirement, automatic enrolment into a workplace pension and household personal finances?

Those are the questions set out to be answered by the Office for National Statistics in their Wealth and Assets Survey.

 

Their latest release of data, which are preliminary estimates for July 2016 to December 2017, uses attitudinal data and contains some interesting findings.

According to the survey, 12% of people during this period reported they always or most of the time ran out of money at the end of the week or month. As a result, they needed a credit card or overdraft to get by.

The proportion of people with ‘more month than money’ remained unchanged compared to the period July 2014 to June 2016.

It was also reported that 44% of respondents said they would not be able to make ends meet for longer than three months, if they lost the main source of household income. This was a slight fall from 46% in the previous reporting period.

A good rule of thumb is to hold between three and six months worth of committed expenditure as a cash emergency fund. This level of cash savings is especially important to prevent you from slipping into expensive debt if you face a short-term financial emergency, including the loss of household income.

The longer-term loss of household income can be insured against with income protection insurance; something worth considering if losing income would derail your long-term financial plans.

According to the research, 48% of younger respondents (those aged 16 to 24 years) said they would not be able to make ends meet for longer than one month if they lost the main source of income coming into their household. This was compared with 26% of all respondents before.

Commenting on this finding, Toby Bainbridge, Head of Protection Solutions at Royal London said:

Our research shows that more than half of people said they didn’t need income protection, yet the ONS survey shows that if young people were to lose their main source of income, they would not be able to make ends meet. The industry has work to do, to change people’s mindset, so they see protection as a necessity instead of something they don’t need.

Sadly it’s only when illness strikes or an accident happens that people realise how valuable the financial protection from an income protection or critical illness plan can be.  This is a challenge to overcome, as time and again people say insurance is expensive and won’t payout and we need a concerted effort by the industry to address these misconceptions.”

8% of respondents reported that they would be unable to meet an unexpected major expense equivalent to or greater than a month’s income.

Turning to pensions, nearly half of employees reported believing that employer pensions were the safest way to save for retirement.

The self-employed, however, placed greatest confidence in property as an investment for retirement, with 42% saying this was the safest way to save for the future.

It’s always interesting to see polarised views around pensions and property as a vehicle for saving for retirement. In our experience, the most successful retirement plans include a mix of pensions, investments, cash savings and maybe even residential property investment.

Relying on one form of retirement savings, to the exclusion of all others, is unlikely to result in such a good outcome in later life.

17% of those aged 16 to 24 years felt that they knew enough about pensions to make decisions about saving for retirement; this was compared with 42% of all non-retired respondents.

There is clearly still a knowledge gap when it comes to saving for retirement. Understanding your choices and options, and the mechanics of how pensions work, is so important so you can make the right decisions about your future.

63% of eligible employees were aware that they had been automatically enrolled into a workplace pension.

Of all eligible employees who reported that they had not been automatically enrolled into a workplace pension, 91% were already enrolled into a pension scheme.

This goes to show how successful automatic enrolment into workplace pensions has been since it was introduced.

Looking at this latest Wealth and Assets Survey from the Office for National Statistics, how do your attitudes about money and general financial position compare?