How has Covid-19 affected the UK's retirement finances?
A few recent studies have highlighted what impact the coronavirus pandemic has had on UK adults from each stage of the retirement journey.
interactive investor’s Great British Retirement Survey 2020 (GBRS) captured the responses of over 12,000 adults, and the FCA’s Financial Lives 2020 and October 2020 Covid-19 panel surveys (FCA) reveal how the pandemic has affected people’s financial lives.
Combined, these surveys offer an invaluable insight into the UK’s retirement and financial landscape in an age of Covid for ‘the retired, those approaching retirement and younger savers.’
So, let’s take a look at some of the key findings:
Many people’s pension plans have had to change due to the pandemic. Over one in eight (and one in five in the 60-65 age range) who are yet to retire think they will have to delay retirement. Source: GBRS
Of the respondents who thought they would have to delay retirement, 24% said that concerns over coronavirus-related investment losses might mean they would never be able to retire. Source: GBRS
26% of retirees have had to use income drawdown for pension income. This compares to 22% last year. The survey states that reasons for this may include reduced returns from other investments. Source: GBRS
One in four people found that unexpected life events such as divorce, illness, bereavement and redundancy play havoc with their pension plans. The most affected were women and people with kids. Source: GBRS
When asked if they were more likely to take out an annuity now, due to the covid pandemic and investment uncertainty, 57% of the non-retired said no. 7% said yes (rising to 9% in the South West and North East of England) Source: GBRS
Major financial concerns
Among retired people, the major financial worry was stock market crises (52%) followed by the rising cost of living (42%). For non-retired people, the major financial concern was running out of money (25%). Source: GBRS
The non-retired had taken advantage of the enforced lockdown to focus on managing their finances. 80% had sufficient time for financial administration, 53% had up-to-date wills, and 26% had taken outlasting power of attorney. Source: GBRS
Whereas 38% of adults have seen their financial situation worsen because of coronavirus (with 15% seeing it worsen a lot), retirees have been better insulated. The survey suggests this is due to State pension and defined benefit pensions not changing. Source: FCA
The biggest increases in product holdings are in pensions and e-money. 70% of non-retirees had a pension in accumulation in February 2020. Auto-enrolment has seen 90% of employees aged 25-54 take up a pension. Source: FCA
The Covid pandemic has had a small impact on people’s opinions of financial service providers. 17% of adults trust banks more, 15% trust them less. Opinions of banks and mortgage lenders appeared to have been led by experiences of mortgage payment deferrals, which were mostly positive. Source: FCA
You can read the full Great British Retirement Survey 2020 from interactive investor right here, and browse the results of the FCA’s surveys over here.
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