Employees want tools and support to understand how much they need for a comfortable retirement as many struggle to balance short-term financial needs and longer term goals.
Research with 3,077 workplace pension savers, by provider Fidelity International, found that too many people wait until their 40s to prioritise saving for retirement.
But this can mean there’s “a significant gap between what’s saved, and what’s needed” for a comfortable old age, the provider warned.
Obviously, financial priorities change with different stages of life. The research showed savers aged 18-34 focus on immediate goals. More than a third (35 percent) prioritise saving for a home, 29 percent prioritise everyday expenses, while only 15 percent take retirement planning seriously.
Mid-career employees (aged 35-44) put everyday expenses first (40 percent), as many in this age group have managed to buy property. Fidelity said this is the life phase where priorities start to shift. Nearly a fifth (18 percent) are still focused on saving for a home but now 28 percent are giving more attention to retirement planning.
However, the research found that retirement planning only starts to take precedence when workers reach the 45-54 age group. In this cohort, 39 percent make saving for retirement a priority, narrowly overtaking everyday expenses (37 percent). The proportion saving towards a property is 9 percent.
The pension provider’s research also looked at sentiment around long-term savings and retirement plans. Two-fifths (40 percent) of respondents said they want support to understand how much they should be paying into their pension for a comfortable retirement. This rises to 50 percent for respondents under the age of 55.
The findings show that 20 percent aged over 55 expect to work for longer than they had hoped. Within this age group, 62 percent said this was because they expected they would need to make up any shortfall between what they have saved and what they will need, or because their financial circumstances have changed.
Daniel Smith, head of workplace investing distribution at Fidelity International, said: “At the start of your working life it can feel as though there is an endless list of financial goals to work towards – from repaying student loans to saving for a first home. These immediate goals naturally take precedence over longer-term planning, such as saving for retirement.
“However, waiting until your 40s or 50s before prioritising your retirement savings can result in a significant gap between what’s saved, and what’s needed for a comfortable retirement. Individuals need access to tools and guidance that enable them to balance short-term financial needs and goals throughout different life stages in a tax efficient way. With the right support, these goals don’t have to compete – they can coexist.”
He said the findings suggest many individuals want a clearer sense of what ‘good’ looks like when it comes to retirement saving.
“Knowing how much to contribute – and when – is critical to building confidence and avoiding shortfalls later in life.
“It’s crucial that employees have access to the right support, tools and guidance that help them feel in control of their finances throughout their working lives and make the best decisions for their personal goals. While many will undoubtedly be juggling several different savings goals at any one time, it’s important to help individuals balance and prioritise the impact, timing and tax efficiency of saving decisions throughout their lives, including saving for retirement.”
He added that financial wellness is about understanding an individual’s total financial situation.
“We believe this begins when someone first starts saving and extends well beyond their working life – managing changing priorities along the way.
“Employers are often the gateway through which employees access educational resources, by partnering with financial services providers to implement financial wellness programmes. Raising awareness of these programmes enables employees to benefit from the support available to them – understanding how to maximise their workplace benefits and maximise their pension contributions.”
