New research shows a disconnect between people’s aspirations for retirement and their financial readiness
In a world of GMP equalisation, trivial commutation, and annuitisation, it can be tempting to focus on the detail and lose sight of the end goal of pensions. The aim is to ensure people have enough to live on when they retire. Encouraging people to think about a pension as a means to a lifestyle is a way of prompting them to take action.
Research by Skipton Building Society has found a discrepancy between what we think we want from retirement and what we want in reality.
Bootstrap DNA by Charles Jencks, 2003
The researchers used electrodes to track people’s physical responses to images of various activities – from gardening and golf to safaris and sailing – to see what really got them enthused.
They identified five retirement “personas”: activity seekers, adventurers, comfort seekers, knowledge seekers, and workers. People have varying degrees of each of these personas.
The importance of understanding people’s personality is starting to be recognised. The Pensions Advisory Service (TPAS) is trialling a tool called Bambooing which helps identify consumers’ approach to saving and risk.
“Understanding a person’s financial personality is critical to ensure the right outcomes,” says TPAS’ chief executive, Michelle Cracknell.
We are not always aware of our own personalities – 64% of participants in the Skipton study reported a different version of their goals to those they responded well to in the skin testing.
Understanding a person’s financial personality is critical to ensure the right outcomes”
You could save a lot of money if you think you want to go on safari but actually you’re more interested in spending time with your family, neuroscience consultant Dr Jack Lewis told attendees at the research’s launch event.
More than half of respondents (51%) said they were looking forward to retirement, but almost a third said they did not know if they would have enough income to fulfil their ambitions. Two thirds said they were not confident they were sufficiently prepared financially.
“These are worrying findings,” says David Cutter, CEO at Skipton Building Society. “We cannot have a country of people bursting with aspiration, whose dreams are then struck down by apathy or aversion to financial planning”.
We cannot have a country of people bursting with aspiration, whose dreams are then struck down by apathy or aversion to financial planning”
Then again, the research was conducted on people who were ten to fifteen years away from retirement, who are likely to have a large component of their retirement income as DB pensions.
Tomorrow’s retirees with pure DC pension pots may have much lower expectations of retirement and, with the face of retirement changing all the time, the traditional clear-cut retirement may be a thing of the past.