We all know saving for the future is important, yet nearly half of the UK still are underprepared or not prepared at all for retired life, so here, Sussex Business Times considers new research from Skipton Building Society and questions how you can be a bit more savings savvy
New research by the Skipton Building Society has recently found that nearly half (48%) of UK consumers aren’t saving for their retirement. The research demonstrates how a large proportion of the public are significantly underprepared for their retirements, after monitoring the retirement savings behaviours of over 6,000 UK consumers. Through the tracker methodology these consumers are grouped into five distinct “savings” categories according to household income, how much they are using to fund their retirement and retirement preparedness.
Skipton’s data shows that UK consumers are most likely to fall into the ‘Ostrich mentality’ category when it comes to saving for their retirement, with this group not saving for their retirement or their savings are falling short, and don’t have anything in addition to the State Pension.
When asked why they weren’t saving appropriately for the future, two-thirds (66%) of this category admitted they choose not to save because they can’t afford to. However, of those with savings that are currently falling short, 38% believe they’ll be nowhere near their savings target by the time they retire.
When looking at the UK as a whole, this mentality is certainly widespread. More than half of non-retirees (51%) have not yet saved anything to fund their retirement and half (49%) have no idea how much they need. When it comes to saving, over a third (38%) of people surveyed said they can’t afford to save and 13% admit they choose not to.
In comparison, just 6% of the people surveyed have been categorised as having a more sophisticated portfolio with a broad range of investments and savings. Nearly half (47%) of the group are saving to fund their retirement through a Cash ISA, over one third (37%) through a personal pension, 32% through stocks and shares investments.
Across the rest of the UK, Skipton’s data shows that it is a mixed picture when it comes to retirement saver types, but overall it seems that a worrying proportion of the UK simply aren’t looking ahead. According to the latest YouGov research commissioned by credit information provider, Equifax, almost a third of Southerners (32%) in particular are very or fairly concerned about not being able to meet their financial commitments in 2017, let alone saving for their retirement. The new research also revealed that 30% of Brits think their financial situation will worsen next year; only 15% believe it will be better. So, we need to start thinking smarter about saving in this financially difficult time.
Here are some starting points:
- Find out how much money you will need to fund your retirement
Even though retirement may seem a way off, calculating just how much you need is the best way to begin tackling the issue. If you are unsure where to start, it creates a road map for your financial future. Many people tend to overestimate how much they’ll need.
- Set a savings targe
The way to overcome this is to break down this sizeable goal into smaller, more achievable savings targets. You are much more likely to achieve your goals if they seem realistic and reachable, and smaller annual or monthly targets help to do that. What about the 50/20/30 rule? This rule helps you to build a budget by using three spending categories. 50% of your income goes towards living expenses and essentials, 20% goes towards financial goals and savings, and 30% can be used for more flexible spending and non-essentials. This will put you ahead of the 51% of adults who aren’t saving anything towards their retirements, and the 49% of UK adults who have no idea how much they’ll need to save to fund their retirements.
- Start now
Small changes to spending habits could make your targets a less of a scary, futuristic goal and more of a reality. One way to start this is to review the outgoings listed on your bank statement, or keeping a spending diary. An audit of your personal finances will reveal many of the non-essential expenses eating into your savings. Some of the most common expenses people say they would definitely sacrifice in retirement include television packages (45%), gym memberships (45%) or non-essential insurance policies (40%). It could be worth taking a minute to consider whether there are any of these things you could afford to sacrifice before you retire.
- It’s never too late
When retirees were asked in Skipton’s survey about the sacrifices they had made since retiring, some of the most common ones were going out less (33%) and spending less on clothing (33%). Spending less, however, doesn’t have to mean that you miss out. For example, take advantage of seasonal sales when buying clothes, so you don’t need to compromise on quality. When planning days and nights out time your cinema trips so that you see cheaper off-peak screenings, and check online for discount codes before making purchases.
- Seek financial advice
It’s important to learn more about your options and find the method or product that suits you. Are you someone who likes a hands-on approach to saving, or do you prefer a more automated process?
- Two heads are better than one
Financial advice doesn’t need to cost an arm and a leg. Use the internet, or another option is to reach out to relatives who have already retired. Get in touch with retired family members and find out what financial products they use, the sacrifices they’ve had to make since retiring, and how they went about their planning.