UK's cash-strapped savers struggling to provide for the future

Barclays Wealth asked 1,000 people who are already saving for their retirement which products they are saving through and what factors they considered when choosing how to save. The research shows that consumers have a number of requirements they look for when deciding how to fund their retirement. Low risk, high growth savings products are an obvious preference for many. However, the findings indicate that the rise of more flexible pensions such as Self Invested Personal Pensions (SIPPs) which have become more widely known about in the build up to and post A-Day, combined with the current pensions landscape, will benefit many consumers as they look for the tax efficiency, flexibility and level of control a product has to offer.

Stephen Ingledew, Director, Barclays Financial Planning, said,

“The research shows that people still see saving for their retirement as a low financial priority as they struggle to balance setting aside a reasonable amount for the future with the financial demands of everyday living. Despite this, some people have taken note of the changes which have been made to the pensions landscape over recent years as the Government strives to make saving for retirement easier for people today. One of the consequences of the A-Day pension simplifications is that SIPPs have become more popular and are increasingly regarded as one of the most effective savings vehicles for people looking to benefit from the new rules.

“Consumers are looking for products that make best use of the benefits brought about by A-Day such as flexibility, the ability to manage your own pension investments and increased tax allowances. Barclays offers A-Day compliant products which maximise these benefits, such as our recently developed Flexible Retirement Planning Service. This service is also flexible enough to take into account the fact that different factors are important to different consumers when saving for their retirement. I would urge people, no matter what their age, to step back and assess their budget so they can make a call on how much they can realistically save in order to take advantage of these changes and work towards a more comfortable and secure retirement.”

Key findings:

How are we saving for our retirement?

• The results show that people aren’t putting all their eggs in one basket, but choose a number of vehicles to fund their retirement.
• Of these, pensions are still the main vehicle, with 77 per cent of respondents using pensions to save for their retirement. 34 per cent of people save or invest for their retirement through ISAs and PEPs, while eight per cent have their retirement funds directly in unit trusts or bonds.
• As house prices steadily climb, 34 per cent of people are relying on property as a means of saving for their retirement.
• 25 per cent of people claim they are preparing for their retirement through cash savings accounts. 17 per cent of respondents are funding their retirement with just cash, which is quite worrying given the greater returns they could get by saving through other means.
• Just 18 per cent are putting money aside for the future through stocks and shares.
• What factors do we face as we plan for our retirement?
• Affordability is the key factor for people as they plan for their retirement (43 per cent). Interestingly, affordability is a major factor for people looking at ISAs and PEPs (58 per cent) stocks and shares (61 per cent) and unit trusts or investment bonds (66 per cent), suggesting people view these as a supplementary means of financing their retirement outside of the traditional pension wrapper.
• Many people are interested in the benefits of products such as SIPPs which enable them to profit from the changes brought about by A-Day. Flexibility of how and when payments could be made is a factor 22 per cent considered, while 21 per cent looked for control over their pension fund. 14 per cent look for flexibility as to when they receive an income from their pension and the size of such payments, while the same amount (14 per cent) want access to the funds before they retire – another benefit introduced by the recent pension simplifications now that you can draw your tax free cash and not have to buy an annuity at the same time.
• Risk is key for consumers, with 28 per cent citing this as a major factor for consideration. This is particularly true for people who hold their retirement funds as cash savings (50 per cent).
• 27 per cent of people see the ease of setting up and managing a product as an important feature that drew them to that product.
• Tax efficiency is also a major pull for people (26 per cent), particularly those who save for their retirement through ISAs or PEPs as 45 per cent of those investing in these products chose tax efficiency as an important factor. In comparison, just 26 per cent of people contributing to pensions recognised tax efficiency as a major attraction of this retirement option – despite the increase in the limits for tax-free contributions introduced by A-Day.
• 25 per cent of people look for the growth potential of products when deciding on the best savings route for their retirement. For those investing for the future through stocks and shares, this is particularly important - 50 per cent regard growth potential as an important factor.
• 22 per cent of people look for the most effective means of maximising their employers’ contributions.
• 14 per cent claim they are investing in the only option they knew was a valid means of saving for retirement, which reflects the mass inertia surrounding the issue of planning for retirement.
• 16 per cent of people have been drawn to products on recommendations from their financial adviser, while a further six per cent have gone on recommendations from family and friends

About Barclays Wealth

Barclays Wealth is the leading wealth manager in the UK with £78.3bn assets under management (2005). It is made up of a number of businesses that provide customers with a comprehensive range of solutions covering private banking, investment, life and pensions to meet their financial planning needs, in the UK and overseas.