Building financial futures across a lifetime
Pensions are a cornerstone of the UK economy. They mobilise long-term capital at scale to fund housing, infrastructure and businesses across the UK; but ultimately their purpose is to deliver a comfortable retirement for individuals. However, for too many people this is currently out of reach: 41% of people in work between the ages of 25 and 55 are not on track for the retirement income they’ll need.
The reasons for this are complex. Financial wellbeing in later life does not just hinge on salary and saving. Just as savings compound over a lifetime, so too can inequalities and a lack of opportunities.
As a leading pensions provider L&G is committed to addressing this challenge through our customer and client proposition, and with strategic partnerships, both existing and new. But just as there is not one cause, there will not be one solution. That's why at L&G we are now launching Decades Ahead, and bringing together industry, policymakers, civil society, employers and savers to collectively tackle this issue.
This gap presents both a challenge and an opportunity: to rethink how we help people build long-term financial wellbeing. While our industry has discussed inadequacy at length, our Decades Ahead programme seeks to go beyond narrating the problem. With others, we intend to move from observations to action.
Research
Working with our research partner, Public First, we’ve carried out a landmark study, drawing insight from more than 8,000 people across the working age population to identify the key cohorts in the UK who are experiencing pension saving challenges. This research serves as an informed foundation for our programme, highlighting the many contributing factors that impact retirement savings and compound – positively or negatively – over decades.
Our initial report focuses on the insights from those aged 40-54, a generation too young to benefit from the security of Defined Benefit pension schemes, yet with less time to benefit from auto-enrolment. The median Defined Contribution pension wealth for this age group is £27,000, which translates into an estimated annual retirement income of around £1,000. In addition, for key sub-groups, it is significantly lower: for renters £4000, part-time workers £6000, single adults £12,000, and workers in London, £14,000.
For people in their 40s and 50s, the decisive decades before retirement still offer real opportunity. Modest contribution increases alongside practical support, and clearer choices, can materially improve retirement outcomes, with plenty of time for savings to compound before being converted into retirement income.
Working in partnership
It’s not only our research that takes a life stage-based approach, L&G is fortunate to partner with organisations who are aligned in educating and empowering individuals in financial literacy and services.
Money Ready
Financial literacy is key to supporting long-term financial stability and the sooner we can introduce this information, and support the development of this knowledge, the bigger the impact we can have. L&G and Money Ready’s Change the Game programme builds these skills through progressive, gamified lessons covering earning, saving, spending, risk, fraud and budgeting. Through the partnership, the programme aims to reach 255 new primary schools and around 18,000 pupils.
Age UK
Poverty in retirement is increasing and there are growing inequalities within our older population. Those who are struggling often aren’t receiving all the support they’re entitled to, including benefits, and face barriers accessing that support. L&G and Age UK are working together to expand access to Holistic and Information and Advice Services, providing direct and in-person support to help people identify and apply for vital benefits. With a target to increase income by £3,500 per person using the service, the opportunity to bolster the financial stability of many older people in retirement is significant.
Looking for our next partnership
We believe that charities, community-based groups, community interest companies and other third-sector bodies can all help to solve the issue of long-term financial wellbeing. We are looking for organisations to partner with us to build interventions that support long-term financial wellbeing and pensions adequacy for the workplace entrants, and the 40-54 age group.
We invite any who are interested in tackling this issue, and work withing us to deliver interventions which will make a difference, to get in touch: decadesahead@landg.com
Change won’t be simple, but the progress driven by auto-enrolment over the past 14 years shows what is possible. This is our call to you, policymakers, employers, financial institutions, communities and individuals, to join us in building and delivering the interventions that will make a difference now and over the decades ahead.
