- Two in five say money is the issue that most affects their mental health
- One in three has experienced a negative financial shock in the past three years
- About 58% of adults under the age of 66 have had to stop saving or save less
Nearly one in three people are spending savings or pensions ahead of schedule to keep up with household bills, new research shows.
More than half of adults of all ages say the rising cost of living is their most pressing financial concern, followed by running out of money and not saving enough for old age.
Two in five say money is the issue most affecting their mental health, and one in three have experienced a negative shock to their finances in the past three years, according to an annual pension survey from Interactive Investor.
More than half of adults say the rising cost of living is their most pressing financial concern
The survey, which asked 9,000 people about their finances, was published after official data showed inflation remained at 6.7 percent for the second month in a row.
The most common events that threaten people’s finances are their own or a family member’s illness, followed by redundancy and caring responsibilities.
Interactive Investor found that 58 percent of adults under 66 have had to stop saving or save less, and almost one in four would like to save more for a pension but can’t afford the extra contributions.
‘The cost of living crisis is undermining the pension future. It is stifling pension savings,” said Alice Guy, head of pensions and savings at II.
‘It forces people to postpone their retirement dreams. And it’s causing many savers – whether retired or not – to look anxiously at their pensions and savings, worrying whether they will be enough. Most of us are affected in some way.”
But Guy points to some positive findings: ‘In general, older people appear to be less affected by the cost of living than younger generations.
‘Most have paid off their mortgages, many have built up decent pension savings, and they are all benefiting from the triple lock on the state pension element of their pension income.’
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Meanwhile, almost four in five adults have a pension, rising to nine in ten people who work full-time.
Guy adds: ‘Far from a battle between generations, we are all on the same side, with many parents and grandparents making sacrifices to help the next generation and giving generous ‘living legacies’ to their loved ones.
‘For the lucky ones, parents and grandparents can do their part to rebalance inequality, but this also requires government policy.’
II called on the government to consider a range of measures to help people improve their finances. These include:
– Keep the triple lock, but reform the way it is applied into a flattened measure, rather than focusing discussions on its abolition
– Introduction of earlier rights to a state pension for people with age-related health problems
– Consider increasing minimum pension contributions under automatic enrollment from a total of 8 percent – 4 percent personal, 3 percent from an employer and 1 percent tax relief – to 12 percent, with the ambition to increase this to 15 percent in the future
– Improving financial and pension education in schools, and launching a public education campaign on pensions, focusing on key decisions such as how long a pension should last and the impact of taking too much
– Distributing ‘wake-up packs’ at life stages such as starting work, birth of a first child, age 40, age 50 and key retirement dates, with a one-page summary document
– Helping older generations help younger relatives by increasing the £3,000 annual limit on giving away gifts without paying inheritance tax, and introducing a higher annual exemption from capital gains tax on gifts
– Increasing the £325,000 nil rate for inheritance tax in line with inflation, and reforming the £175,000 additional nil rate for homes to cover people without children and renters.