According to new research by Interactive Investor, nearly one in three people are dipping into their savings or pensions earlier than planned in order to cover household expenses. The rising cost of living is cited as the most pressing financial concern for over half of adults, closely followed by the fear of running out of money in retirement. Additionally, two in five individuals state that money is the primary factor impacting their mental health, and one in three has experienced a negative financial shock within the past three years.
Interactive Investor’s survey, which interviewed 9,000 people regarding their financial situations, was released alongside official data revealing a consistent inflation rate of 6.7% for the second consecutive month. The research identifies personal or family illness as the leading financial threat, followed by redundancy and caring responsibilities.
The survey findings also suggest that 58% of adults under the age of 66 have had to decrease or cease their savings efforts, while nearly a quarter would like to contribute more to their pension but are unable to afford the additional payments. Alice Guy, head of pensions and savings at II, laments that the “cost-of-living crisis is undermining retirement futures” and is causing individuals to postpone their retirement plans and worry about the adequacy of their pensions and savings. However, Guy does acknowledge that older generations seem to have been less affected by the cost-of-living crisis compared to younger age groups, thanks in part to having paid off their mortgages and accumulated substantial retirement savings.
According to the research, approximately 80% of adults have a pension, rising to 90% among those in full-time employment. Guy emphasizes that addressing the financial inequalities requires the joint efforts of parents, grandparents, and governmental policies. Interactive Investor recommends several measures for the government to consider, including reforming the triple lock mechanism, granting earlier state pension entitlement for individuals with age-related health issues, raising minimum pension contributions, improving financial and pension education in schools, distributing “wake-up packs” at significant life stages, and implementing tax exemptions and reforms to inheritance tax regulations.
If you are concerned about the adequacy of your pension savings, Interactive Investor suggests taking action by reviewing your existing pensions, obtaining a state pension forecast, exploring the possibility of merging old pensions, and utilizing the free pension tracing service provided by the government.
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