Three in five face uncertain retirement

Three in five people (62%), equating to more than 34 million adults, will face a major life event or financial challenge which could seriously affect their retirement savings, according to Scottish Widows’ latest Retirement Report, focusing on the impacts of vulnerability.

These experiences range from ill health, divorce and bereavement, to lower financial resilience and confidence managing money, and often result in a reduced focus on retirement saving.

More than half (54%) of people with vulnerable characteristics say putting money aside for retirement increases their financial stress today, compared with 29% of other adults.

Meanwhile, nearly twice as many vulnerable people facing life or financial challenges are overwhelmed when thinking about retirement savings (61% vs. 33% non-vulnerable).

Challenges surrounding vulnerability can also be compounded by wider hurdles that people face for being part of minority groups. Two in three LGBTQ+ adults with a vulnerability (66%) say thinking about retirement savings makes them feel overwhelmed, and a similar number (65%) of single mothers reported the same.

This anxiety creates a barrier to planning. Almost two in three (63%) have done little to no research into retirement, and over a quarter (28%) haven’t made any arrangements. A further 28% haven’t started saving into a pension yet, while 13% have stopped or reduced their retirement savings in the past 12 months.

As a result of this, 60% of adults don’t feel confident managing their retirement savings. Two-thirds (66%) worry that they will run out of money in retirement, and 38% within this group are part of an ethnic minority.

While working for longer is a common fallback to make up for a retirement savings gap, this isn’t always an option. A third (31%) of adults don’t think they’ll ever be able to afford to stop working at retirement age, with this rising to 53% of those with a health concern.

Jill Henderson, Retirement Expert at Scottish Widows, said “Financial vulnerability is something many people face at different points in their life for a variety of reasons. It could be because of ill health or going through a major life event like divorce, bereavement or a change in working status, as well as things like debt, having little to no savings or low financial confidence. Whatever form it takes, the reality is that most of us will be affected by financial vulnerability at some point in our lives, even for a short period.

“This can have a permanent impact on people’s long-term financial plans, as the demands of living today may affect saving for tomorrow. When income drops – for example, because someone may be unable to work for health reasons – savings can start to dwindle, debt can build, and longer-term financial plans may take a backseat.”