Only 2% of British people are saving effectively for retirement
David Harrison, managing partner at True Potential LLP discusses the current savings gap in the UK and how over half of UK savers are placing their funds in products that add no significant value to their investment, and do little to help the economy.
Research has shown that the average Briton spends 19 years in retirement but with savings that will run out after just seven years.* There are currently 10 million people in the UK over 65 years old, with projections that the number will have nearly doubled to around 19 million by 2050.**
It is therefore worrying that in our research, 35 per cent of those surveyed are currently saving nothing at all for retirement and just two per cent are saving using stocks and shares-based funds, one of the best ways of growing wealth ahead of retirement.
Out of the remaining 803 respondents, 25 per cent are contributing to a pension, 18 per cent are saving in cash in a high street savings account or cash ISA, four per cent are relying on future inheritance and one per cent is choosing to invest in property.
Those people who are preparing for retirement by saving in cash are getting little to no return on their investment. British savers with money in cash ISAs have been hit hard for many years, with a combination of high inflation and policies such as quantitative easing and Funding for Lending, which mean banks don’t need to raise APRs in order to attract customers.
In order to close the savings gap that exists in the UK, the first step is of course to get more people saving, thus changing behaviour. However, what is equally important is how you save, and that is why there is a need for greater education around managing finances.
Stocks and shares are a proven way of saving effectively for retirement as they continue to outperform the Consumer Price Index (CPI) to beat inflation, while having the added benefit of stimulating the economy. If the Stocks and Shares ISA allowance were to be increased to £25K per annum, per person, investors’ money could grow in real terms, tax-free, until they retire and beyond.
* ‘The Future of Retirement: A new reality’, HSBC Global Report, 2013
** ‘The ageing population’, http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/value-for-money-in-public-services/the-ageing-population/
This was posted in Bdaily's Members' News section by True Potential LLP .