Whilst a third of UK savers in our survey said they have been negatively impacted financially by COVID-19 and have adjusted their short-term spending accordingly, this hasn’t yet affected long-term views around retirement confidence. The inertia of the UK’s auto-enrolment system continues to show strength, with only 7% of members having reduced or stopped their pension contributions (below the global average of 13%) and 80% taking no action with regard to their retirement savings.
Although not a direct result of COVID-19, we continue to see a lack of retirement confidence in the UK. One of the key reasons limiting retirement confidence was not having enough spare money to save for retirement. This, coupled with a strong desire from members for their employers to continue with contributions, highlights the importance of maintaining automatic levels of saving.
We were pleased to see a good sense of awareness from members about the risks of overreacting to market events and “selling at the bottom,” with almost 60% of the sample believing now is a good time to invest for the long term. Only 5% of members felt that they should sell stock market investments and switch into something lower risk. Members also showed an appreciation for lower volatility strategies and for companies that are managed responsibly with regard to the crisis. These findings provide useful insight into the kinds of funds members would like to see their savings invested in.
Key Finding #1: Almost a third of savers have experienced a deterioration in their financial situation since the COVID-19 outbreak
We began by taking a pulse check on the current financial situations of individuals, compared with the period before the COVID-19 outbreak. With 24% of the sample reporting to be furloughed from employment, our results were in line with data from the Office for National Statistics, which reported that 27% of the UK workforce had been furloughed and less than 1% had been made redundant between 23 March and 5 April 2020. 1
Given that a significant number of savers have seen an impact to their jobs and the income they receive, it is not surprising that almost one-third (31%) of our sample felt that they were worse off financially compared with before the outbreak. Whilst the majority (42%) of the sample said that their financial situation hadn’t changed, we may not see such a positive picture in the future as furlough schemes come to an end and redundancies increase.
Key Finding #2: Retirement confidence remains low
What impact does this change in employment circumstances have on retirement confidence? Are people thinking that far ahead? We asked our savers how optimistic they are that they will be financially prepared for retirement by the time they plan to stop working.