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People in the UK realise there is a retirement challenge and that change lies ahead
They also recognise that are ultimately responsibility for funding their retirement
The popularity of annuities may have fallen since Freedom and Choice, but people still value stable income
The concept of retirement remains constant. The reality of retirement continues to change.
Since Freedom and Choice in 2015, pension scheme members have more options than ever. But this freedom can make it more difficult for them to decide among the array of investment and income options.
In this report, we look at the expectations of UK workers and compare these with the reality of retirees — in terms of spending needs, consumption sacrifices, income preferences and sources for advice.
Here’s a preview of a few of the findings:
People in the UK realise there is a retirement challenge
The good news is that people in the UK are aware of the challenge before them, realising that the amount they’re saving will not be close enough to what they will need to fund their retirement.
Workers are realistic about their expected income in retirement People know that their income will decrease in retirement and most expect their retirement income will fall by around half. This is quite accurate when you compare it with the income retirees are receiving in retirement as a ratio of the income they received in their working years.
Recognition that changes lie ahead
Importantly, most people recognise that they are ultimately responsible for their income in retirement and they are prepared to do something about it.
The sooner the better The most common advice retirees feel they can give current savers is to start saving earlier (69%), followed by engaging with their pension earlier (65%). However, this is not what’s currently happening — only 15% of people in the working population stated that they have actually begun seeking help with their pension.
More freedom, similar choice Although only 30% of retirees surveyed bought an annuity, 70-80% of those in the working population and approaching retirement said they would value a solution from their employer that provided a predictable income. This shows that although the popularity of annuities may have fallen with the introduction of Freedom and Choice, people still value stable income.
What does this mean for sponsors, schemes and the wider industry in helping members to achieve better retirement outcomes?
This document contains certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular nvestment objectives, strategies, tax status or investment horizon. Investing involves risk, including the risk of loss of principal. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
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This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
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