Advertising feature from Phoenix

How do we get Britain back to work? Tackling our high rates of economic inactivity has been described by Liz Kendall, the Secretary of State for Work and Pensions, as ‘the greatest employment challenge in a generation’. The challenge is indeed a serious one. Since the pandemic, the proportion of workers who are economically inactive has risen by 1.7 percentage points, equating to 850,000 more people out of the workforce, with ill health and disability appearing to be the principal cause. We remain the only G7 nation to have failed to return to pre-pandemic levels of employment – something likely to be both caused by and contributing to our sluggish economic performance.

Since its introduction just over a decade ago, automatic enrolment has undoubtedly transformed retirement savings in the UK, allowing millions of workers to effortlessly save for their future.  Some 22.6 million people now contribute to a workplace pension, an increase of 47 per cent before auto enrolment’s inception in 2012. That is a significant achievement. However, a growing body of research shows many people are not saving enough for retirement. Some 14 million defined contribution pension savers are not on track for the retirement income they expect. We must acknowledge – as they have in Australia – that the current contribution level of 8 per cent is simply insufficient to adequately provide for individuals in retirement.

Since its introduction just over a decade ago, automatic enrolment has undoubtedly transformed retirement savings in the UK, allowing millions of workers to effortlessly save for their future.  Some 22.6 million people now contribute to a workplace pension, an increase from 47 per cent prior to auto enrolment’s inception in 2012. That is a significant achievement. However, there is also a growing body of research that shows many are not saving enough for retirement.  Modelling from Phoenix Insights, Phoenix Group’s longevity think-tank, shows that 17 million people (55 per cent of DC savers) are not on track to achieve the minimum retirement living standard income recommended by the PLSA.

Across the global economy, a pattern is taking place – with humans living longer than before. While all of the underlying reasons are to be welcomed (not least the improvement of healthcare) this increase in longevity is also bringing profound consequences for the way in which we structure society. As the UK’s largest long-term savings and retirement business, Phoenix Group has found how people haven’t changed their financial planning despite living longer. Last year, the group launched a new specialist think tank – Phoenix Insights – to explore the wider impact of this trend. As part of this work, the think tank director, Catherine Foot, recently joined The Spectator’s business editor, Martin Vander Weyer, for a special podcast on this topic.

Research by the Social Market Foundation, sponsored by Phoenix Group, estimates the average person reaching retirement age is almost £250,000 short of the pension pot they’ll need to deliver the pension income they want. That’s a savings gap of £132 billion across the UK. Let those numbers sink in. They’re alarming, to say the least. Even more alarming is that they’re only half the problem. It isn’t just that people aren’t saving enough; they’re also in danger of making the wrong decisions with what they have saved. The questions facing savers today are more complex than ever. Should I save into my pension or pay off my mortgage? Can I afford to withdraw cash from my pension pot now? Should I sell my small business?