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UK shows lowest levels of retirement readiness compared to US and Australia

An international survey assessing preparedness for retirement in the UK, US and Australia has found that UK respondents are the least “retirement ready”. The joint survey, released by the Institute and Faculty of Actuaries (IFoA), the Actuaries Institute of Australia and the American Academy of Actuaries shows some worrying trends around what people in all three countries expect of their retirement.

There is a clear lack of confidence amongst respondents that they will have an adequate income once they reach retirement age. Nearly two-thirds (58%) of all respondents expect to live a poor or modest life in retirement.

In addition, we found that around a quarter (24%) plan to retire in their 70s.  Deferring retirement may not be possible for all, especially those in poor health.  Yet only a quarter (25%) said that they would have enough money if they had to stop working prematurely.

IFoA President Marjorie Ngwenya, said:

“Whilst all three countries have made efforts to improve retirement policies, progress has been modest at best; we firmly believe that more needs to be done. Over the past couple of decades, as pensions models have changed in all three countries, the risks around having adequate funds in retirement have shifted from employer to employee. It’s crucial to explore the effect this is having as people take increasing responsibility for managing the risk of outliving their savings. There is a real risk this could lead to pensioner poverty in the latest stages of life.”

Overall, just under a third (29%) of respondents said they knew how long their savings would last in retirement. This was 15% in the UK. Of all those surveyed in the UK, only half (52%) had made efforts to gather information to help them prepare for retirement and, across all international respondents, those from the UK were the least likely to have taken action.

Marjorie Ngwenya, continued:

“Given the results of this survey, one of our key recommendations is around financial education.  Whilst engaging individuals on ways to plan for retirement is an issue in all three countries, the UK is clearly lagging behind Australia and the United States. There is a lack of knowledge around the level of savings that will be needed for a comfortable retirement and how long those savings will need to last. We believe the development of easy-to-use projection tools would go some way in helping to address this gap.”

The report recommends that financial education efforts target those least likely to be taking positive action. For example, one major concern is that, across the UK, US and Australia and across all age groups, our results suggest that females are particularly poor at planning for retirement. Across the three countries, 47% of men compared to 34% of women are preparing to retire.

The survey also pointed to low preparation among those in middle-income groups across the board, a group who could actually be in a good position to take positive action to secure their income in retirement. In all three countries, less than half of those in this income range were preparing for retirement at all. 

We recognise that there are a large group of people who will never engage with their pension. We found that in the UK, respondents were particularly passive, being least likely to be putting aside any personal savings for retirement and most likely to be expecting to rely on the State. However, expectations of income from an occupational pension were similar across all three countries. This suggests that if the State wants UK respondents to take greater personal responsibility, as current policy reforms suggest it does, then occupational pension schemes could play a pivotal role.

Marjorie Ngwenya, added:

“It’s encouraging that all three countries have introduced recent changes to retirement policy designed to help people prepare for retirement. But, as this report highlights, more concerted action needs to be taken now if people are to have sufficient savings when they retire. UK respondents appear to have a higher reliance on the State Pension, making it even more important that the system is sustainable and adequate.”

Jenny Lyon, President at Australia’s Actuaries Institute, said:

“The age pension does provide a significant and very important financial buffer for a majority of older Australians. But this survey should certainly serve as a wakeup call to policymakers that Australia’s world-class superannuation system needs bipartisan support and individuals should be encouraged to begin saving as early as possible.”

Bob Beuerlein, President at American Academy of Actuaries, said:

“This original research finds there are similar patterns of retirement readiness across our three countries – indicating there is room for improvement for all. We have a clearer idea of how working-age people see the retirement picture changing for them and how they are — and are not — preparing for retirement.”

The IFoA and the American Academy of Actuaries will be holding a joint webinar to discuss the survey results on Thursday 12th October at 1500 BST.


Editorial notes:

About the Institute and Faculty of Actuaries

The Institute and Faculty of Actuaries (IFoA) is a royal chartered, not-for-profit, professional body.

Research undertaken by the IFoA is not commercial.  As a learned society, research helps us to fulfil our royal charter requirements to further actuarial science and serve the public interest. 

Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.

Members of the IFoA have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.

Members are governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of actuaries in society.

The IFoA is available to provide independent expert comment to the media on a range of actuarial- related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.


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