Evaluation Scotland Wales
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Barriers to planning for retirement and later life

Evidence type: Review i


The UK Strategy for Financial Wellbeing published by the Money and Pension Service (MaPS) sets out five Agendas for Change to help people make the most of their money and pensions. The ‘Future Focus’ agenda for change commits MaPs to encouraging people to engage with their future and be empowered to make informed decisions for, and in, later life.

Automatic enrolment means that more people than ever in the UK have private pension saving, yet 12 million people are not saving enough for an adequate income in retirement (DWP 2017). The resistance to planning and saving is seen across all segments of the population and, of the 40 million working-age people, 22 million say they don’t know enough to plan their retirement, this includes:66% of 18–24-year-olds; 64% of working-age women; and 48% of those approaching retirement age (55–64).

The study

Academics at Leeds university were commissioned by MaPS to build upon the existing body of knowledge, and in order to allow MaPS to develop a further understanding as to whether fundamental barriers for retirement planning sit outside socioeconomic barriers and therefore do not fit within the existing segmentation model developed by the Money and Pensions Service (MaPS) consisting of ‘Struggling’, ‘Squeezed’ and ‘Cushioned’ (see Market Segmentation – Segment Infographics – available on the MaPS Research page). This also allows MaPs to inform services they commission and in developing customer/segmentation models within the pensions space.

This review sought to answer the following questions:

  • What is stopping some individuals from planning for retirement?
  • What behavioural barriers do they face?
  • How can we break down those behavioural barriers?
  • Can these barriers be classified together as groups?
  • How might we use this information of individual differences to improve MaPs pension products?

Key findings

The review puts forward three primary explanations of barriers for retirement and later life planning: psychological barriers; socioeconomic factors; and attitudes that influence behaviours.

1) Psychological barriers:

a) Inertia and procrastination: Individuals often delay or fail to make decisions even when they are aware those decisions are in their own best interest.

  • Potential causes of inertia and procrastination:
    • I. Decision complexity: Retirement planning is complex and overwhelms individuals with information and choices.
    • II. Ostrich effect: Individuals want to avoid disappointment.
    • III. Regret aversion: When individuals are uncertain, they prefer doing nothing to avoid negative feelings.

b) Changing preferences over time:

  • Self-control /present bias: Not saving results in an immediate cash reward, and requires sacrificing immediate gratification for distant goals. Individuals place more emphasis on ‘today’ and require significant incentives to see a benefit for the future.

c) Perception of delayed benefits:

  • Construal level theory: People are disconnected with their future selves and perceive future outcomes as more abstract.
  • Money slack: Individuals believe their future selves will have more money than they do currently.
  • Time perception: Retirement is a long way in the future – people place less weight on its consequences

2) Socioeconomic determinants of retirement planning:

  • Financial literacy: There is a strong positive relationship between financial knowledge/literacy and retirement planning.
  • Education and income level: Higher levels of formal education as well as income can be predictors of likelihood to plan for retirement.
  • Age and gender: Older people tend to plan, or think more about planning, for retirement. Gender is not a significant predictor of propensity to plan and save for retirement.

3) Attitudes influencing retirement planning:

  • Perceived financial literacy: Individuals’ self-rated financial literacy differs from their actual financial literacy – but these may be equally important in the context of retirement planning.
  • Trust in institutions: High levels of trust in private financial institutions can encourage long-term savings in those institutions. However, high level of trust in government can lead to lower pensions savings as individuals hope the government ‘will not let them starve’.
  • State pension uncertainty and life expectancy: Life expectancy can affect whether an individual is a ‘planner’.
  • Future time perspective and retirement goal clarity: Having clear goals is more likely to lead to planning and saving adequately for retirement.
  • Intra-household interactions: Individuals are influenced by the beliefs and preferences of other household members.

The review also highlights some mechanisms to overcome the barriers, and demographic effects which may impact barriers.

Mechanisms to overcome the barriers:

  • Use of defaults: Automatic enrolment has increased participation rates around the world. However, it may not be enough to increase total savings if individuals also choose, by default, low contribution rates and conservative investment options.
  • Framing: Understanding behavioural barriers to retirement planning is crucial to improving communication with potential savers.
  • Short term benefits: Tying long-term savings with short-term benefits can be beneficial as it makes saving for retirement produce immediate benefits .e.g. short-term monetary rewards such as tax deferrals or tax exemptions, or approval of others for taking positive action.
  • Educational interventions: Retirement seminars are effective in increasing long-term savings. This effect is large for those with lower education and those will save little.

Evidence on demographic effects outside pensions:

  • Geographical location may impact attitudes to savings because of local or regional traditions, such as common proverbs, which can influence behaviour.
  • National culture can also influence savings behaviour – e.g. collectivist vs individualistic cultures, including whether citizens believe they can rely on larger social ‘cushions’.
  • Ethnicity and gender may also play a role in determining individuals’ risk tolerance and their financial decisions, but the research is not conclusive.

Points to consider

  • Methodological strengths/weaknesses: There are no details given of the approach taken to the review, so it is unknown if relevant papers have been omitted. However, there are over 60 papers cited, from a wide variety of reputable sources such as numerous academic peer reviewed journals, so the study appears thoroughly researched.
  • Relevance: This report is relevant to all stakeholders, academics and policymakers with an interest in pensions and retirement planning, particularly in relation to financial wellbeing.
  • Generalisability/ transferability: The research is mostly generalisable to the UK though readers should note that a small amount of the evidence is based on studies from other countries such as the United States and China.

Key info

Year of publication
United Kingdom, United States, China
Contact information

Professor Iain Clacher [email protected];

Professor Peter Ayton [email protected];

Pamela Searle