December 17, 2024
Whatever your current life stage – wealth building for the future, approaching retirement, or taking your first steps into retirement itself, how confident are you that your retirement funds are sufficient to sustain your lifestyle?
We recently looked at how longer lifespans are changing the way we look at life after 50 (the ‘second 50’) and what that means for retirement planning as we move from the old model of a three-phase life: education, work, retirement, towards a more flexible approach to a multi-stage life.
Now arrived on our desks at Talis IFA is a new report from Nucleus Financial. The 2024 Nucleus UK Retirement Confidence Index examines the nation’s level of confidence in their finances to enable them to live comfortably for the rest of their life.
Here’s our snapshot of some of the key findings, and thoughts on how to increase your own level of confidence.
How confident are we about our financial future?
Overall, the sample surveyed (4,318 UK adults over 18, evenly split between men and women) revealed a drop in confidence, with the Retirement Confidence Index score falling from 6.9 in 2024, to 4.6 in 2024. (The index score is a number out of 10, where 0 is not at all confident and 10 is totally confident.)
One of the statistics contributing to this score is that just 34% of respondents say they are confident they would have enough money to live comfortably for the rest of their lives.
Other questions covered a range of factors which have roles in determining confidence levels, including:
Another worrying statistic is that, according to the PLSA, the definition of comfortable suggests annual expenditure of £43,100, whilst 22% of UK adults (the largest group) reported believing that between £20,000 and £30,000 will be sufficient.
So not only is there a reduction in confidence, but there’s also a gap in perception of what’s needed.
In addition, around 39% of UK adults are not contributing to a pension, yet just under half (44%) believe the State Pension won’t exist in the future (though how far ahead isn’t specified)
When should we start thinking about our retirement plans?
According to the report, 70% of those 55+ say retirement planning should start in your 20s or earlier, and concerns about having enough money to live comfortably for the rest of your life aren’t limited to people approaching retirement.
Other research published in 2024 suggests that some younger people may be facing a pensions gap, with, ironically, the success of the drive for auto-enrolment in workplace pensions, somewhat to blame. While many more people are now contributing monthly, a lack of education has led to low awareness of the need to contribute more than the minimum monthly (8%, with employers paying at least 3%). The Living Wage Foundation recommends that at least 12% of annual salary should be put aside.
As we move towards retirement, we naturally begin to focus more on what we want life to look like at that stage – whether we approach it in a series of steps, gradually reducing work commitments, or decide to take the plunge. In the last few years there has been an increase in the numbers of people returning to work following a pandemic-induced decision to retire early. Whether that is as a result of a genuine desire to return to work, or driven by concerns over finances, it’s another indication of our more flexible attitudes.
How can we increase our confidence in our financial future?
The report from Nucleus highlighted some statistics from a 2022 survey from the FCA which begins to explain why so many of us lack confidence when it comes to our finances. 24% (around 12.8 million) adults expressed low confidence in their ability to manage money, 38% (20.3 million) rated their knowledge of financial matters as low, and 17% (8.7 million) lacked confidence in their own ability to find the right financial products and services for them.
What does increase people’s levels of confidence is getting advice from an experienced IFA.
An IFA can help you to shape your plans for your future and identify the financial goals that will support those plans. Understanding not only when you want to retire, but how, and the level of income you’ll need, helps you to create a financial plan to set you on your path towards financial freedom.
It’s not only about retirement, of course. If you’re younger, along the way you’ll probably be looking at how to finance your home and lifestyle, pay school fees, set aside wealth to help the next generation, support care fees in later life, protect your finances from the unexpected, and make the most of your tax-free saving allowances.
If that sounds a lot, that’s what your Talis IFA is here to help you with. We pride ourselves on our ability to offer plain English financial advice, walking with you along your financial journey as you increase your knowledge and confidence in making financial decisions.
We advocate a long-term approach to financial planning (we often call it our ‘get rich slow’ approach). The other important thing is that, whilst it’s true to say that it’s never too early to start planning for financial freedom, it’s also never too late to make a difference.
People who take control are more likely to feel confident, so if you want 2025 to be the year you increase your confidence in your financial future, talk to a Talis IFA.
site by motley.co.uk