Uncovering the regional ‘retirement readiness’ gaps in the UK

There have been efforts from the government to ‘level up’ regions throughout the UK to drive investment in local areas, boost job opportunities and reduce regional inequalities – with varying degrees of success. But when it comes to retirement preparations, our latest research finds the north/ south divide is very much alive and kicking.

New polling from Phoenix Insights, Phoenix Group’s longevity think tank, among 2,500 over 45 workers shows wide gaps in ‘retirement readiness’ across different regions in the UK. Over 45s in Greater London and the South East are saving around 40% more towards their retirement than those in the Midlands and the North of England.

In the North of England, the average amount saved in a pension is less than £100k per person, falling significantly short of the estimated £248k needed for a ‘moderate’ standard of living in retirement*. Scotland and Wales have slightly better saving levels, although average amounts are still sitting around the UK-wide average of £112k, less than half of the target fund needed.

Top five UK regions with least savings among over 45 workers

1.         North West (£91.4k)
2.       Yorkshire and Humberside (£97.6k)
3.       East Midlands (£98.1k)
4.       West Midlands (£98.4k)
5.       South West (£101.7k)

There are many factors that affect people’s ability to save in the different regions. These include, differences in living costs, wealth deprivation, socio-demographics, household incomes, financial literacy, job opportunities, access to financial advice, and the list goes on. With all these elements feeding in, we can’t afford to take a ‘one-size-fits-all’ approach to solving the imbalances. Efforts to combat under-saving must reflect the needs of all parts of the UK.

Supporting good work

Top of the government’s priority to address the savings gap should be to support people to stay in good quality work through their 50s and 60s. This is particularly important given the state pension age is set to increase over the coming decades, with the decision about bringing forward future increases  due shortly after the next general election. Alongside the many benefits of staying in good work, are the financial boosts of continuing to receive an income from an employer and maintaining contributions towards a pension.

Our polling shows half (51%) of people expect to drop out of work before reaching state pension age with physical health, mental health, and age discrimination common barriers to remaining in work. This highlights the need to radically change the way we think about work, making it more sustainable and accessible, and with better opportunities to upskill and change careers.

Supporting savings

Coupled with support for good work should be policies that encourage greater levels of savings and engagement with retirement planning. The introduction of automatic enrolment in 2012 has resulted in a huge uptick in pension participation across the UK, but saving at the minimum contribution level is unlikely to result in a decent retirement income, and many people are still excluded due to the age or earnings threshold. Improving the coverage and effectiveness of auto-enrolment will help more people to increase their savings levels and better their retirement income prospects.

There is also a sizable proportion of the population who are approaching retirement and haven’t benefitted from auto-enrolment or the generous final salary pensions of the generations preceding them. For those without additional financial resources to draw upon, it is important there is an adequate safety net through the benefits system to protect the most vulnerable, and this group have access to good financial advice and guidance.

Of the people we surveyed, some will have more than 20 years to plug the savings gap – and the sooner they address this the easier it will be. But those closer to retirement and facing a shortfall in their savings will need to plan their future income requirements carefully.

Responding to the possibility of longer lives

On average, people across the UK are living longer than the generations before them and could spend over a third of their lives in retirement. People have a responsibility to prepare for their futures but they must be supported by the government and employers to enable more sustainable working lives for all, build financial engagement, and broaden the effectiveness of auto-enrolment.

To enjoy fulfilling longer lives, Phoenix Group recognises that we all need to think differently about our futures, and the futures of those we care about. Our pensions heatmap is part of Phoenix Group’s campaign to encourage people to start talking about how we live, work, and save for our longer lives.