The Nucleus UK Retirement Confidence Index, which launched today, is the first project I’ve been involved with since joining the Nucleus team and I’m delighted it’s a topic which can have such a profound impact on so many.

    Retirement confidence is crucial to our overall financial and personal wellbeing. We spend our lives working towards retirement. How we plan for it will dictate a good deal about the comfort and enjoyment we can look forward to in this later stage of life.

    I’ve certainly found myself thinking more about my own retirement lately: how much I might need to live the life I want for myself and my family, whether I’m putting enough by, could I (should I) do more? And then there are all the more pressing demands for money in the here and now.

    If someone who has spent their adult life emersed in pensions and retirement isn’t clear on these points, then where might that leave the ‘normal’ adult population who are starting to think seriously about retirement?

    We explore that question and much more in our new UK Retirement Confidence Index through a combination of consumer research and discussions with seasoned financial advisers and planners.

    The answers are in turn fascinating, surprising and concerning.

    UK retirement confidence is positive, but is it well informed?

    The inaugural Nucleus UK Retirement Confidence Index Score is 6.9 out of a possible 10. That’s higher than we might have expected, which is positive but, as we look below the surface of this statistic, there is cause for concern.

    We did not find a strong link between accessing regulated advice and retirement confidence. However, there was a much clearer connection to retirement confidence from those with an actual financial plan, regardless of whether that plan is written down or involves a financial adviser.

    Accessing pension funds and higher retirement confidence are also closely linked. What comes first – the confidence or the cash? Some people will have accessed pension money in the belief (correct or not) that it was the best course of action. Others will feel empowered by the act and reassured by having that money in the bank. They may have used it to clear their mortgage or other debt. There are often very good reasons for leaving pension funds well alone, but it takes a financial adviser or planner to know these things about individuals.

    The quality of confidence is crucial and it’s important to keep in mind that confidence can be misplaced or misinformed.

    People may be taking actions now which they are very happy with and confident in, but which could cause them real financial and personal problems further down the line. Incurring large income or inheritance tax costs that could easily have been avoided is just one example raised by our advice professionals.

    The outlook for retirement confidence is negative

    We predict that the overall UK Retirement Confidence Index score will fall over the next few years as the long tail of defined benefit schemes works through and the reliance on defined contribution pensions increases.

    Cost of living worries are set to continue, as are low expectations around investment returns. Auto-enrolment has had an incredible impact when it comes to pension scheme take-up and contributions, but the consensus is that the current 8% contribution level simply does not add up to a comfortable retirement.

    Everyone in the industry has a role to play   

    One thing is clear: there has probably never been a greater need for accessible regulated financial advice with the confidence and reassurance it can bring.

    Advice works, and we need to find ways to encourage more people to access it. However, we also need to accept the advised cohort will only ever be a minority of people. Many others need help and education, ideally personalised to their situation at least to some degree. And we need to find ways to deliver this to the millions of people saving through auto-enrolment.

    These are big challenges but are not insurmountable if providers, advice professionals, regulators and the government work together.

    We set out actions for each in the report that can help us reach a point where more people save more, understand what they are saving for and why, and are empowered to do so in an environment of trust and stability. This is how we, as an industry, can achieve meaningful change to UK retirement confidence.

    Take a look at the report here

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