Our financial resilience report 2024

27 May 2024
Clare Moffat, our pension expert, looks at the findings from our 2024 financial resilience and cost of living report, what it means for different age groups and how you might be able to help your employees.

Inflation has reduced, wages have increased, and National Insurance (NI) has been cut but that doesn’t mean that people have stopped worrying about money. For many, the cost of living crisis has become a way of life. For others who weren’t affected a few years ago, the increase in mortgage interest rates has meant that they are feeling the effects now.

There are different challenges being faced by different age groups and it’s interesting to break the research down.

 

Financial resilience

Age 18-34

This age group are unsurprisingly worried about rising rents and mortgages. In the past year, housing costs rose the most for this group, by £380 a month. A staggering 55% of this group who have a mortgage, have an original term which is more than 26 years. One in three of this age group have low financial resilience in coping with an unexpected expense of £500 or more compared to one in four of all respondents. This age group are more likely to have younger children than other groups which brings additional financial concerns. They are also more anxious, stressed, have a lower mood and are more likely to feel ashamed about their ability to cover their costs.

Age 35 – 49

This age group are most likely to be in financial crisis or near to it. This means they either can’t or are struggling to pay their main household bills - 20% compared to 13% of the sample as a whole. They’re also most worried about rising costs and are most likely to own a house with a mortgage, with nearly half (48%) in this situation. Credit is being used by some to help pay their mortgage. There are many people still to come off their fixed rate mortgage deals which may see them face increased mortgage payments as a result of interest rates not coming down as quickly as inflation.

Age 50 -69

The mortgage crisis doesn’t affect this age group quite as much, as 56% own their homes outright and higher interest rates is a positive for savers. Almost six in ten (58%) say that they’re OK or comfortable. They’re less likely to have been affected mentally or emotionally than other age groups probably due to having more in savings. Although 15% of this group have no savings, another 15% say that they have savings of £50,000 and over.

 

Pension contributions

Age 18 - 34

Although retirement might seem far off for this group, only 6% of t his group have stopped saving into their pension and around 49% of them have a workplace pension, which is good news. Paying early into a pension means that their contributions benefit from time to grow. If someone has opted out of paying into a pension, then we know that a reminder from their employer can help – this might be good at pay review time.

Age 35-49

This group aren’t as far from retirement as the younger group and 76% say that the cost of living has affected their retirement plans. They’re the most likely age group to worry about not having enough savings in retirement and more likely to think that they’ll be renting or paying a mortgage in retirement. 6% have either stopped or reduced their pension contributions.

The gender pension gap can start to show more for this age group too especially in relation to women who’ve taken time out of the workplace or reduced their hours to care for family. Employers can help by explaining how pensions work and the fact that contributions are percentage b ased. At pay review time employers can promote the benefits of pensions but also the fact that more money can be paid into pensions, which could benefit employees’ standards of living in retirement. Our gender pension and wealth gap report has some other suggestions for how you can help.

Age 50 -69

Although nearly 4 in 10 haven’t worked out how much they will need for their retirement, this group are most likely to say that the cost of living has affected their retirement plans. Almost one in four (23%) of the group aren’t paying into pensions at all . This might be because they’ve retired and are currently accessing their pensions or if they are very high earners they might be limited by what they could pay in.

Only 6% of this group have paid a one-off payment into their pension. This is larger than the percentage for the whole group (at 4%) but at this age and life stage, paying a lump sum can help reach their pension savings goals, and achieve the retirement income they need, as well as help to reduce the level of tax paid. It’s worth mentioning this especially if employees are paid a bonus. One-off payments into pensions are especially attractive for those who are over 55 as they can access their tax free cash soon after making the contribution.

 

How can employers help?

Promoting benefits that are offered through the pension scheme or other employee benefits such as employee assistance programmes can support the well-being of your employees. Pointing them to tools that can help them budget, understand benefit entitlement, save money or work out how much they’ll need, versus what they might have in retirement can also help them better plan for their future.

Read the full Financial resilience report 2024 - Weathering the cost of living crisis and find out more about information available to support your employees. 

 

 [1] The research was carried out by YouGov and took place between 22nd February and 7th March 2024  with a sample of 4,000 nationally representative UK adults.