Context
The Planning and Preparing for Later Life survey is a new survey designed to explore how well individuals make informed choices about retirement and how likely they will able be to have financial security in retirement. It was commissioned by the Department for Work and Pensions in the increasingly important context of retirement planning given both an ageing population (with individuals living and working longer) and successive policy changes which have placed more freedoms on how and when people draw their pensions down. The survey was focussed on 40–75-year-olds and there was particular interest in employment status (employees vs the self-employed) and on the role played by financial literacy.
The study
The aims of the survey were to: help strengthen policy development on retirement income adequacy; inform the ‘50 Plus: Choices’ strategy particularly to support people to stay in work for longer; understand how the new pensions flexibilities have affected retirement attitudes and behaviours; improve understanding of planning for later life among the self-employed.
The questionnaire was subject to cognitive testing and piloting. The final survey achieved a nationally representative UK sample of 2,655 40–75-year-olds, drawn from an initial sample of 9,153 prior respondents to the Family Resources Survey who had agreed to be re-contacted for research purposes. Sampled households were contacted initially by letter and one sampled person per household was interviewed using Computer-Assisted Telephone Interviewing between November 2020 and February 2021.
The self-employed were oversampled and sample sizes were sufficient to enable subgroup analysis by employment status, occupation, income, retirement status, household composition and financial literacy (measured using a short, 6-item version of the Healthy Ageing in Scotland financial literacy index).
Key findings
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Income adequacy in retirement: 24% of 40–75-year-olds had no private pension and 16% had not started saving for retirement.
- 23% of people not yet retired said they had a very good idea of the income they would need in retirement.
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Using Pensions Freedoms to access Defined Contribution (DC) pensions: 56% of 60–65-year-olds with any DC pensions had accessed at least one.
- 29% of these had not received information, advice or guidance from their pension provider, Pension Wise or a financial advisor.
- 67% had chosen to take a cash lump sum to meet short-term income needs (living costs or debts)
- 59% of those accessing DC pensions before State Pension age had no other private pension provision.
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Making working later in life easier: 62% of people who had not yet retired expected to continue in paid work beyond their ideal retirement age.
- The ability to work flexibly and to work fewer hours when approaching retirement were key factors that would make working later in life easier.
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Knowledge of recent changes to the State Pension: 20% of people below State Pension age thought they would be able to draw their State Pension earlier than they could do so in practice.
- Those using the ‘Check your State Pension’ website were more likely to declare their State Pension age correctly (69% vs 39%). The study reports this difference, and those which follow, as statistically significant at the p<.05 level of significance.
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Focus on the self-employed: The self-employed were less likely than employees to have started saving for retirement (22% vs 7%), less likely to have a private pension (65% vs 89%), and more reliant on sources of non-pension retirement income, such as savings and investments (80% vs 68%).
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The role of financial literacy: People with low financial literacy were typically less well prepared for retirement. For example, they were less likely to have private pension provision (53% vs 86% of those with high financial literacy) and more likely to underestimate their State Pension age (31% vs 13%).
Points to consider
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Methodological strengths/weaknesses: Although the sample was weighted using sample weights, the authors note that calibration weighting (to population distributions) was not used.
- The authors note that multivariate analysis was not undertaken and that causal interpretations are untested.
- The authors also note that they were reliant on respondents’ recall and knowledge surrounding their pensions and retirement plans.
- The self-employed were oversampled and sample sizes were sufficient to enable subgroup analysis by employment status, occupation, income, retirement status, household composition and financial literacy (measured using a short, 6-item version of the Healthy Ageing in Scotland financial literacy index).
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Generalisability/ transferability: The study was commissioned before the Covid-19 pandemic. As such, the authors note that it was not designed to explore the impact of the pandemic on people’s retirement plans but that the findings may have differed had the survey been designed and conducted at a later time.
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Relevance: This report is likely to be of relevance to those with an interest in the topic of retirement planning, although findings which relate to State Pension Age, pension rules and the provision of advice and guidance are specific to the UK context.
