Pension scheme members’ confidence that they have saved enough money to retire has dropped, according to the latest data from Trafalgar House.
The third-party pensions administrator said that while the drop in confidence in retirement income is “relatively small”, from 31.7 percent in 2022 to 30.9 percent in 2023, it represents the end of a positive shift towards people feeling they would be able to meet their retirement needs and goals.
The number of scheme members that said they “have much less than they need” has increased from 44.6 percent to 47.8 percent.
Retiring later
Members were also asked whether they felt they would be able to retire at their normal retirement date, earlier, or if they would have to retire later to meet their financial needs.
Researchers found that the majority (53.7 percent) feel they will either need to retire late, never, or they simply don’t know.
The findings come from the Trafalgar House Trust and Confidence Index and are the third data set published. The latest batch of results examined members’ own decisions and views on their retirement funds, and how these may have changed from 12 months earlier.
Self belief
Members’ confidence in their own decisions remains higher than their belief in the role of the industry and others. Confidence in their own choice of where their pensions are held has risen from 63.4 percent to 64.6 percent, and confidence in their own investment choices is up from 57.9 percent to 58.4 percent.
However, members’ confidence about the amount they have saved into their pot had fallen slightly from 53.5 percent to 52.2 percent.
Daniel Taylor, client director at Trafalgar House, said: “Perhaps controversially, it could be considered a good thing that confidence in having enough funds to retire has dropped.”
‘Grossly underestimated’
He said: “As an industry we have long worried that the general public haven’t been realistic enough about their retirement pot. [They have] grossly underestimated needs and failed to take into account the cost of living, longer life spans and [have been] overly reliant on state pension provision, all meaning they would be in for a big shock.
“This would also have a huge impact on the economy, not to mention social factors. It could be argued that if there is an acknowledgement there won’t be enough, more can be done to address that, and earlier.
“What’s also interesting is that confidence in their own decision making is up. Higher, in fact, than belief in the role of industry and others in meeting their needs.”
Empower members
However, Taylor added: “Where this confidence is coming from is another question. Our last results showed that member communication was the most important factor in building trust – does this mean we are doing something right?
“The fact is, members will be responsible for more than ever before when it comes to decision making at retirement so it is crucial they are empowered to make those decisions, and not doing anything detrimental that could undo years of hard work and savings. The realism around expected retirement dates is also reassuring, albeit disappointing as a whole.”
Previous results from the index have shown an increase in the public trust of the pensions industry score for the fourth year running to 5.26 out of 10 from 4.95. Researchers found that the most important factor for building trust with the public remains better communication.
