That’s according to a new study from the Pensions Policy Institute (PPI), sponsored by Capita, shared exclusively with Express.co.uk. Research has laid bare the impact of the coronavirus pandemic on people’s ability to save for retirement.
He found young people and those from black, Asian and ethnic minorities (BAMEs) the hardest hit.
The Future Life Report explores how changes in the work and retirement landscape can affect the well-being of future retirees.
According to research, 20 million adults in the UK (38% of the adult population) have seen their financial situation worsen as a result of the pandemic.
This led to one in ten adults reducing their pension contributions, with 6% stopping payments altogether.
The impact of unemployment is heaviest on young workers.
One in five (20%) of 18-24 year olds who were working in February 2020 were unemployed in January 2021.
This is compared to seven percent of workers of all ages.
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Amid mounting financial pressures, more than half (57%) of people aged 18 to 24 used some form of debt between March and September 2020, compared to just 20% of those aged 55 and over.
In July 2020, 20% of 18-34 year olds were behind on their bills, compared to 8% of those 35 and over.
In 2019, there were 288 people over the statutory retirement age per 1,000 people of working age, but that figure is expected to rise to 361 per 1,000 by 2050.
Daniela Silcock, head of policy research at the Pensions Policy Institute, said: “It is extremely concerning to see the disproportionate impact of the pandemic.
“With the growth of the odd-job economy and the more fleeting nature of careers, there is a risk that people will withdraw even more from their retirement savings pot.
“Given the complexity of decisions, especially since the introduction of retirement freedoms, many people will find it difficult to make the choices that best meet their health and care needs over the course of their life. future life. “
The report concludes that the retirement prospects of today’s young savers are very different from those of previous generations, but that the pension sector has not changed “appropriately” to prepare people for retirement.
Stuart Heatley, Managing Director of Capita Pensions, added: “COVID-19 has clearly exacerbated issues around social gender and race disparities and periods of unemployment, but frankly these trends have been around for some time now.
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“The simple fact is that saving for the future will always seem pointless if it means that today is a struggle.
“Advice plays an important role in supporting people while making critical choices about their future, but most of this advice currently focuses on retirement decisions in old age rather than the ongoing discussions throughout. throughout an individual’s career.
“It is clear that the current pension system is outdated and no longer reflects the needs of society.”
So how do you reverse the situation?
“Pensions are still primarily designed on the basis that a person will be employed full time, with regular pay, without concurrent employment,” commented Mr Heatley.
“But what we have seen and will continue to see are changes in employment, which could include spells of unemployment, agency work, zero hour contracts, the rise of the Gig Economy, etc.
“These lead to less financial consistency and therefore to the understanding and desire to make a long-term savings commitment.
“Uncertainty, by its nature, forces us to focus on the short term initially – and pensions are not a short term consideration.
“Despite the collective efforts of many stakeholders, the key fact remains that pension messages still generate complexity and confusion about relevance and ownership today.
“We need less vendor focus on the market and instead develop a group of like-minded pension, communications and engagement professionals to work together to resolve an issue that has been exacerbated by COVID- 19, but has been around for many, many years.
“To achieve this, we need simplicity, transparency and trust as key steps in enabling individuals to view pensions as a relevant part of budgeting and financial planning today.”
But what about those who have been affected by the coronavirus pandemic? How can they rectify their current situation before retirement?
“While most people recognize the need to provide income later in life, for many people of different ages and generations, the question arises as to whether this is relevant when they are younger, in particular. especially when measured against other priorities like housing, vacations and indeed, just month-to-month, ”Heatley said.
“There is also a lack of understanding perhaps of what pensions are, how they work and also whether they will ever reach retirement or if the term retirement can really be ‘retired’, allowing us instead to reconnect our sources of income later in life. .
“So I would urge people to be a lot more curious about their pension funds – or how they think about saving for life later on. But the onus is really on the pension industry as a whole to lead the change.
Daniela Silcock, head of policy research at the Pension Policy Institute (PPI), added: “These changes could take many forms, for example, products that encourage higher pension contributions when employed full-time to compensate for periods of casual, part-time or self-employment, policies requiring higher contributions from employers and / or for employers to pay full contributions on behalf of those with low incomes, and / or family pension savings instruments that could ensure that people who take time off for care continue on their behalf through employed family members.
Assistance may be available, as Ms. Silcock pointed out.
“There are free guidance services to help people of working age and retirement manage their finances, for example, the Money and Pensions and Pension Wise service and the Pensions Dashboards (currently under development). ) that will allow people to see all of their retirement savings and entitlements in one place, ”she said.
“If industry and policy makers continue to work together, with a comprehensive understanding of the needs and characteristics of today’s workers, a savings system can be developed that improves the chances of young workers to achieve adequate retirement. “