Nine in ten people in the UK are struggling to make ends meet, with only 10 percent saying they do not have any financial concerns.

There is a real fear of a future retirement poverty crisis, according to new research by Cushon.

The UK is cutting back on its savings, with more than half (54%) admitting they are no longer able to save as they want to. And worryingly more than one in ten (13%) say they plan to stop or reduce their pension contributions to save money in the short term – increasing to one in five (21%) 18–34-year-olds.

The rising cost of living is a real concern for more than half of the UK (52%) with those aged 55 and over more concerned (56%). Rising bills (59%) are the biggest worry for UK adults, with the figure standing at 64 percent for women and 74 percent for the 55+ age group. And a third (32%) of people are concerned about the spiralling cost of putting petrol or diesel in their vehicle.

A quarter of people don’t know how they will be able to pay their bills over the next six months. This is unsurprising, as inflation is at a 40-year high, and the cost-of-living crisis is spiralling out of control, with energy bills also soaring.

So, are many across the UK heading towards poverty in retirement?

 

Salary sacrifice

Salary sacrifice is something that can be arranged by every employer. If someone chooses this option, they agree to reduce their salary by an amount equal to their pension contributions, and their employer will then pay their total pension contributions which saves both the employee and the employer money in lower national insurance (NI) contributions.

Although it makes someone’s salary look lower, take-home pay is actually higher due to the NI saving, while the money going into the pension stays the same. Someone earning £30,000 a year can save an additional £200 through salary sacrifice.

And yet despite the clear benefits, Cushon’s research highlighted that nearly two-thirds of people (63%) aren’t aware of salary sacrifice and of those that are, only (34%) of people with a workplace Defined Contribution pension use it.

“There’s a worrying lack of understanding when it comes to salary sacrifice,” added Pollard. “As well as low awareness of it as an option, there is a widespread misconception of what it is and how it works, partly due to the negative sounding name. Both employers and pension providers need to do more to educate people on the benefits,” says CEO and founder of Cushon, Ben Pollard.

 

Lack of savings

The research shows that those aged between 50 and 64 have pension savings that are on average 58 percent short of what they need, adding up to a total annual savings gap of £132 billion.

Equally worrying, a recent report by The Centre for Ageing Better highlighted that one in five pensioners, over two million people, are already now living in poverty.

“Things are exceptionally tough right now, and it’s really concerning that the rising cost of living has forced one fifth of 18–34-year-olds to plan to either reduce or completely stop their pension contributions. People need help and the right support to avoid sleepwalking into retirement,” says Mr Pollard.

“Many people also don’t realise they can benefit from tax relief on their pension. When you pay into a pension, you effectively get a government bonus of at least 20p for every £1 contributed, and when employer contributions are taken into account, it’s an even better deal.  There are also a wide range of payroll-enabled workplace savings products that can allow people to get more value from their pension. One such solution is salary sacrifice, which is a great way for employers to help their employees save money and make their pay go further,” adds Mr Pollard.

Commenting on the much anticipated economic support from the Government, Ivan Harding, CEO and Co-Founder of leading workforce experience layer Applaud says:

“Business leaders cannot and should not rely on and wait for Government support to help their employees mitigate rising living costs. The financial well-being of their employees ultimately lies in their own hands.

“The easiest way to help employees is by encouraging home working. At a time when every penny counts, companies aggressively pushing their staff to return to offices risk putting their employees in financial difficulty. Travel costs, lunch and other work expenses all pile up. And they’re all unnecessary costs. Multiple lockdowns proved employees can be just as productive at home. Business leaders must show more flexibility and compassion for their workers and help them cut costs where they can.

“The next few months are going to be extremely challenging and whilst encouraging home working might not cover the entire increase of a household energy bill, every little helps. The well-being of workforces, both financially and mentally, has to be a priority for ALL business leaders across the UK right now if they’re to make a real difference.”

 

 

 

 

 

 

Amelia Brand
Amelia Brand

Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.