2.4 million were previously financially engaged before changing their behaviour. But past periods of financial uncertainty were the number one driver for people to become financially engaged (27%), meaning a boost in engagement might be on the horizon. Pre-retirees (those aged 55+ who are still in work) are more financially engaged than other age groups – but many aren’t doing essential retirement prep like reviewing their pensions.
1 Mar 2023
More than 24.5 million people (46%) are financially disengaged, according to new research1 from Legal & General Retail.
The study also shows that one in 20 adults - the equivalent of 2.4 million2 people - were previously financially engaged before changing their behaviour. Key reasons for this change include feeling financially secure enough to be less diligent with managing their money (20%), or because other areas of their life have become busier (18%). However, almost a fifth (17%) couldn’t state a reason.
But previous periods of financial uncertainty, such as recessions, were stated as the key driver for people to become financially engaged (27%), so the current cost-of-living crisis could mean people keep a closer eye on their money.
Almost two thirds of respondents (62%) said they regularly check their household budget and their spending, while 73% shop around for the best deal, or use discount codes and vouchers (64%).
On average, pre-retirees (those aged 55+ who are still in work) are more financially engaged than the rest of the population (62% compared to the UK average of 54%). But many are still inactive when it comes to their retirement planning, suggesting people might not know where to start.
More than a third (34%) do not currently check their workplace pension while 28% do not currently review their personal pension. Separate research3 from the provider shows one in five people still reach midlife without having engaged with their retirement at all.
Katharine Photiou, Managing Director of Workplace Savings at Legal & General: “Taking small steps to improve your money habits can have a huge impact on your life. It can also help you feel more in control of your financial situation. Against a landscape of rising costs and record levels of inflation, it can be easy to bury your head in the sand. However, as our research shows, periods of financial difficulty can be one of the leading reasons people take charge of their finances.
“While it’s positive that pre-retirees, in particular, are more financially engaged than the average person, it is concerning that they aren’t engaging in vital steps to prepare for retirement, such as checking their pension. This is the first step of the decumulation process, so many people are leaving themselves at risk of not knowing their full financial picture or how to actively manage their retirement finances when they get there. To help equip people to make the best choices for their future, Legal & General has developed a free Midlife MOT course to give people the knowledge and tools to approach later life with confidence.”
For those approaching retirement, the following points might help people feel more in control of their finances:
Make use of free support services – we know that 52% of UK adults haven’t taken advantage of the free financial guidance that’s currently available to all, including services like Money Helper. Taking small steps like this can play an important role in planning for the future from a place of knowledge.
Be aware of the bigger picture - make sure you have a full understanding of all your assets, whether this is via tools, retirement planning courses, research, guidance, or – where appropriate – financial advice. Taking stock of what you have saved overall and using a pension tracing service to understand your total savings will help make retirement planning easier.
Engage with your pension early… it is crucial that people engage with their pensions early and make decisions from a place of knowledge. For too many people, retirement can feel like something that simply shows up, rather than something they build towards. But if people can access the right tools and support earlier in life, they will feel more confident in making decisions, which will increase engagement and pay off in the long-term.
…but it’s never too late to save – if you are reaching retirement age and worry you do not have enough in your pension pot, it’s not too late to save. Even just £50 per month from age 55 could mean an additional £11,700 by the time you reach state pension age at 674.
1Research was carried out online by Opinium Research amongst 4,000 UK adults aged 18+ between the 14th-20th October 2022. 1,856 participants indicated that they were financially disengaged in the survey. 1856/4000=46% which equates to 24,541,000 UK adults
2181 participants indicated that they were financially disengaged in the survey. 181/4000=5% which equates to 2,390,000 UK adults
3Opinium survey of 4,009 UK adults aged between 40 and 60 years old in the UK was conducted between the 28th December and 6th January 2021
4Assumptions: Contributions increase by 3.5% each year, investment return of 5% each year net of all costs/charges.
Note: Allowing for inflation of 2.5% each year this £11,700 would be worth £8,700 in today’s money terms.
Established in 1836, Legal & General is one of the UK's leading financial services groups and a major global investor, with over £1.2 trillion in total assets under management* of which 39% is international. We have a unique and highly synergistic business model, which continues to drive strong returns. Legal & General provides powerful asset origination and management capabilities directly to clients, which also underpin our leading retirement and protection solutions. We are a leading international player in Pension Risk Transfer, in UK and US life insurance, and in UK workplace pensions and retirement income. Our purpose is to improve the lives of our customers and create value for our shareholders. Through inclusive capitalism, we are investing in long-term assets, such as real estate and infrastructure, that can help build a better society for the future.
*as at HY 2023
Legal & General Retail helps create brighter financial futures for all our customers. The division covers the savings, protection and retirement needs of our c.13 million retail policyholders and workplace members.
In 2022, we had total individual annuity sales of £954 million, and issued £632 million of Lifetime Mortgages and Retirement Interest Only Mortgages. Our Workplace pension platform served 4.9 million members, while our Protection businesses gave peace of mind to more than 6.3 million UK life insurance, 1.8 million group and 1.5 million US customers, taking in £3.1 billion of gross written premiums.
*at 31 Dec 2022