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Understanding Pensions in an Era of Disruption



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Report highlights


This report produced by Retail Economics in partnership with Nutmeg offers guidance for consumers (current and future retirees) on the level of savings and income required for retirement nowadays. This research can also be used to support financial providers in helping them improve business strategies and to better engage clients. Using consumer panel research and ONS data, a calculation is presented for the shortfall between current pension pot values and the income needed for a comfortable retirement.


The report is divided into 5 main sections:

Part 1: Introduction

Part 2: Key Stats

Part 3: The UK Pension Landscape

Part 4: The Pension Deficit

Part 5: Plugging the Pension Gap


Understanding pensions cost and plans - retail Economics



In a disruptive world seemingly transitioning from one crisis to another, achieving financial security in retirement has become paramount. Against a backdrop of high inflation, stock market volatility, rising interest rates and geopolitical instability, the savings process has become more uncertain. As  households grapple with immediate financial concerns, today’s cost-of-living crisis risks becoming tomorrow’s pensions crisis. 

While significant progress has been made to boost pension contributions and engagement, optimal retirement income appears out of reach for many. Faced with soaring bills and the potential of an oncoming recession, people may be tempted to ‘batten down the hatches’ by reducing pension contributions, reviewing investment mix, withdrawing lump sums, or even putting off starting a pension in the first place. Without significant support, those on lower incomes and already under-pensioned are likely to struggle to achieve a balance between meeting short-term and long-term financial needs.

Delaying saving for retirement ignores the already troubling direction of travel. Currently in the UK, the average 65-year-old has a pension deficit of £271,000 – the difference between actual pension pot values and what is needed to enjoy a comfortable retirement. Extrapolated across the population, this equates to a total pension under provision of £187 billion for those on the cusp of retirement.

A decade on from the introduction of automatic enrolment and seven years after Pension Freedom reform, this report produced by Nutmeg in partnership with Retail Economics provides penetrating insight on pension provision in the UK amid the unfolding cost-of-living crisis. It identifies different ‘pension personas’ and looks at attitudes and behaviours that shape how people perceive pensions and save for retirement.

Insight from this research offers guidance for consumers (current and future retirees) on the level of savings and income required for
retirement. This research can also be used to support financial providers in helping them improve business strategies and to better
engage clients. Lastly, using consumer panel research and data from the Office of National Statistics (ONS), a calculation is presented for the shortfall between current pension pot values and the income needed for a comfortable retirement.


The report is split into three sections:

The UK pension landscape: provides an overview of pension provision and the underlying drivers of retirement saving, including identifying the five main pension personas.

The Pension Deficit: quantifies the shortfall between current pension pot values and the income needed to live a comfortable retirement. 

Plugging the pension gap: identifies key strategies and tools for consumers to increase pension engagement to achieve a stronger financial position for retirement.


Key stats

Pension statistics retail economics


The UK Pension Landscape

This section provides an overview of the UK pensions landscape. It explores the key drivers of pension provision, the retirement savings journey, and characteristics of different consumer archetypes including their attitudes, motivations and behaviours around pensions.

The current pensions landscape

An alarming proportion of the UK population are without a private pension, heading towards retirement without adequate financial provisions in place.

Our research shows that around 3 in 10 (29%) UK adults have no private pension savings. For those aged 65+, who are on the cusp of retirement, as many as a third (32%) do not have a private pension leaving the vast majority reliant on just a state pension to provide for them through later life.

With so many retirees dependent upon government for financial support in their senior years, expectations of a ‘comfortable retirement’ are under threat – especially in the context of a cost-of-living crisis, as everyday living expenses like food and energy soar.

Figure 1: Proportion of individuals with no private pension wealth

proportion of people with no pension wealth retail economics

Source: ONS Wealth and Assets Survey

The UK has seen a marked improvement in private pension provision over the last decade as the introduction of the automatic enrolment scheme encouraged millions into saving for retirement. The scheme’s success lies in the fact that saving becomes the default option, reducing the proportion of ‘non-savers’ as action is required for them to opt-out.

While auto-enrolment may have overcome the largest barrier of inertia by simply getting people to start saving, this default option requires limited active decision making, hence lessens engagement among many pension savers. However, with the auto-enrolment minimums unlikely to be sufficient to provide for a comfortable retirement, it could lure some into a false sense of security. More progress is needed to educate, motivate and improve engagement, if people are to enjoy the level of comfort and security they want in retirement.

Indeed, our research shows that a quarter of pension savers have no idea what their pension pot is worth. More than half (59%) of UK employees don’t know how much they (or their employer) contribute to their pension; while two in five (40%) don’t realise they... [extract].


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Too often there is a disconnect between pension schemes and their members. This fuels uncertainty. Almost two thirds (62%) of pension savers say they have no idea whether they are contributing enough; and half (53%) worry about having enough income to see them into their retirement.

Different types of employment affect pension saving behaviour. Workplace pension schemes are designed for traditional working patterns. This can negatively impact employees who take significant career breaks, work part-time, are on short-term contracts, or have multiple jobs.

Certain demographics are disproportionately impacted. Women, ethnic minorities, the disabled, and those on low-incomes are more likely to be in unconventional, temporary or insecure forms of employment. This makes the savings journey to a comfortable retirement more challenging

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Pension customer journey and value framework

Understanding how people value pensions is critical to encouraging positive behavioural changes for retirement saving. It forms the basis of supporting optimal decision making and engagement throughout the pension customer journey, from accumulation through to drawdown.

Our research shows that the path to a comfortable retirement is shaped by the perceived value of pension saving which is underpinned by five key factors:

• Knowledge - understanding pensions and how they work
• Preparedness – access to the financial skills and resources that enable saving
• Motivation – desire and enthusiasm to save for retirement
• Conviction – perceived importance of saving for retirement and level of trust relating to pensions
• Risk – willingness to accept a degree of risk with pension savings

These five attributes can be broadly classified as either ‘function-driven’ or ‘emotion-driven’, as shown in the pension value  framework below (Fig 3).

However, they are also impacted by external factors such as life stage, education, economic shocks, government policy and many other factors. This means that there is also a set of condition-driven influences (structural and dynamic in nature), acting as a background stimulus component within the framework.

Figure 3: The UK Pension Landscape

Pension value framework retail economics

Source: Retail Economics, Nutmeg


The pensions customer journey encompasses the decisions consumers make along the way, and the various touchpoints on their path – from initially considering a pension, to receiving ongoing support from a provider once retired. Key decisions include: when to start saving, how much to save, which savings vehicle to use, how and when to seek pensions advice and access savings. Some consumer decisions are ‘conscious’ (e.g. making an active choice after seeking information), while other decisions are more ‘unconscious’ (e.g. remaining in a default fund).

In reality, the customer journey is not linear. It is shaped by a continuous trade-off between short-term and long-term aspirations. Life events such as buying a house, getting married/ divorced, or having children, often lead to unpredictable income and spending.

Although the underlying incentive to save is to be able to enjoy retirement by drawing a pension which will enable a similar lifestyle to that enjoyed during one’s working life, life events can stifle regular saving. In addition, pension saving is illiquid with a pay-off that can feel far into the distant future for people.

Given these factors, people’s attitudes and behaviours can often result in having saved less for their retirement than originally anticipated. Misplaced faith in alternative sources of income during retirement (e.g. housing assets, inheritance or the level of state pension) can lead to unexpected consequences.


Influence of affluence

Affluence appears to be a significant influence across both the emotional and functional plains of the pensions value framework. Our research shows a strong correlation between income and a rise in the perceived value of pension saving (Fig 4). As household incomes increase, the emotional and functional drivers that support saving for retirement also rise, reflected in higher pension uptake levels too.

Figure 4: Correlation between income and perceived value of pension saving

correlation between income and perceived value of pension saving

Source: Retail Economics, Nutmeg


Those on higher incomes are more knowledgeable about pensions, feel prepared for retirement, have the economic means, and are more comfortable with taking investment risks. Whereas the least affluent feel less confident making financial decisions, are more hard-pressed financially, but also demonstrate lower motivation and engagement with pension saving.

These factors manifest in low income individuals being three times more likely to be without any pension savings than the most affluent, according to the research.

Lower engagement across the least affluent is also likely to reflect a higher proportion of individuals who work across multiple jobs, with workers only eligible for auto-enrolment if earning above £10,000 per annum in a single job with... [extract]

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But even those that do meet the criteria, may see themselves as better off not saving for retirement, at least temporarily. Their current financial situation might be precarious, due to high debt levels or low income in which to cope with rising living costs. In fact, almost half (47%) of households earning below £11,000 per annum say they have ‘no money left over’ after paying for essentials, with almost one in five (18%) admitting borrowing money (e.g. bank loan, family, friends) to help cover everyday costs in the last six months due to the cost-ofliving crisis.

Among those without pension savings, the top three explanations were all related to financial concerns. The research found that:

• 35% (a staggering 5.3 million people in the UK) said that they do not have a pension because they “don’t have enough money to save into a pension”
• 30% said “I’m not working and my income is too low”
• And 24% said “I have too many bills or debts to pay”

Figure 5: Top five reasons people don't have a pension

Figure 5 top reasons people dont have a pension retail economics

Source: Retail Economics, Nutmeg


Opting out of a pension or reducing contributions represents an attractive option for struggling, low-income workers, at least temporarily, until they are in better financial
This takes on greater significance in the context of the cost-of-living crisis. With many low (and even middle-income) households struggling to afford essentials like food and energy, saving for retirement is likely to fall lower down in peoples’ priority lists.


Figure 6: Pension value attributes vary by income and life stage

Figure 6: Pension value attributes vary by income and life stage

Source: Retail Economics, Nutmeg


Pension personas

Broad demographic features such as age or income provide only limited insight about people’s approach to pensions and retirement planning. Ultimately, the pension customer journey is highly personalised and best understood through the lens of individual personas or mindsets.

Using cluster analysis (a statistical method to group datapoints based on common characteristics), five distinct pension personas emerge. These personas reflect shared attitudes and behaviours towards saving for retirement.

Consumers can also transition from one persona to another, depending on life stage, changes to their financial situation, and acquiring new skills/support.

Based on their level of functional and emotional pension value attributes, our research shows that UK consumers are aligned to one of the five pension personas below:


Retirement pension plan statistics - retail economics

Figure 7: The five types of UK pension personas

types of people who have pensions personas

Source: Retail Economics, Nutmeg


Moneymakers are highly motivated and knowledgeable with pensions and are on a strong path to achieving financial freedom in retirement. This cohort are significantly more comfortable taking risks with their investment decisions than other personas, deeming this to be necessary in their quest for maximum returns in the long-term. In fact, Moneymakers are four times more likely to say that they are ‘extremely comfortable’ taking risks with their pension (or financial investments) compared with the average.

The next type of personas is Procrastinators these people tend to.... 

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About this report

This report produced by Retail Economics in partnership with Nutmeg looks at the state of pensions in the UK. It offers guidance for current and future retirees on the level of savings and income required for retirement. The research can also be used to support financial providers in helping them develop effective strategies, and to better engage clients. The research also presents a calculation for the shortfall between current pension pot values and the income needed for a comfortable retirement.


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