Press coverage: Unlucky generation face risk of poor retirement

David Hume Institute in The Times

26th September 2022

Successive policy decisions by Government and employers have created an “unlucky generation” of workers in the UK labour market, who face far greater financial risks in retirement than their predecessors and are less well-equipped to deal with negative consequences.

Less than half (45%) of 1,000 people surveyed across Scotland recognised or understood the increased complexity of the choices about how to invest and when to access their pension pots, nor how this could affect their lives. 

The survey also suggests that younger workers and those from lower socio-economic backgrounds are potentially most at risk from investments underperforming. Just three in ten (31%) 16-34 year-olds were aware of the amount of financial risk people have to manage in their lives as a result of fewer employers offering final salary (defined benefit) pensions. This is compared to 60% awareness in the 55-64 age group. 

There was also a split between social groups, with only 37% of C2DE workers saying they understood these risks. This compares to half (50%) of more affluent ABC1 workers acknowledging the choices involved.

Yet while the increase of risks people face is the result of deliberate policy decisions by Government and employers to encourage more individual consumer choice in the pension market, the survey suggests most people still expect Government to safeguard their wellbeing if things go wrong. 

Over half (52%) of people surveyed said that Government ought to be “entirely” responsible for ensuring that everyone, including vulnerable people, has a living income and decent standard of living in retirement. Only 23% placed that responsibility entirely on individuals. 

Shelagh Young is one of the authors of the report, The Great Risk Transfer, which exposes the increasing burden of risk that is falling on the individual. She commented:

“Despite the fact that a majority of people clearly expect Government to take responsibility for making sure retirement incomes are sufficient, comparatively few understand that Government expects them to live by their own choices – even if, as in the case of pensions, there is now a far higher chance that things will go wrong.

“Our research showed that many over 50s often described themselves as being part of a ‘lucky’ generation that has benefitted from better access to affordable housing and better returns from employer protected pensions, contrasting an ‘unlucky’ cohort in their mid-forties and younger facing considerable risk to retirement income.

“As the cost-of-living crisis ramps up and financial pressures for workers grow, we need to see ministers working closely with businesses on steps to help people de-risk retirement. Failure to do so may result in the millions of those who miss out squarely blaming government for a failure to safeguard their future livelihoods”.

ENDS

Link to online article

The Great Risk Transfer was commissioned by the Institute and Faculty of Actuaries. It will be published on 28 September 2022 with an online debate hosted by Susan Murray, Director of David Hume Institute held on 3 October. Watch the recording of the event below.

New research reveals widespread economic anxiety in Scotland

Press release from the David Hume Institute & Diffley Partnership

25th May 2022

A new survey produced in partnership between DHI and the Diffley Partnership has revealed widespread anxiety about Scotland’s economic outlook. Amid surging prices, the new Understanding Scotland - Economy survey finds:

• A quarter of people have lost sleep due to stress over personal finances, rising to 3 in 10 people in the most deprived areas.

• Adverse financial conditions have pushed many to forego basic necessities, with 3 in 5 going without heating, and more than a fifth skipping or cutting down on meals to save money. 

• Rising prices also appear to be pushing people into more vulnerable circumstances, with a third of people eating into their savings, and a quarter taking on debt. The equivalent figures are even higher in deprived areas, at 36% and 32% respectively.

While concern is widespread, rising prices have not hit everyone equally: 23% of people in the most deprived areas say their finances have become ‘much worse’, compared to 13% in the most affluent areas. Parents and families are also feeling the squeeze, with 43% of households with children having taken on debt or borrowed money. In addition, three quarters of those unable to work due to sickness or disability, and four fifths of the unemployed also report feeling worse off.

While the present picture is concerning, most people expect things to get worse before they get better. The poll finds that 84% of people believe that economic conditions in Scotland have deteriorated over the past 12 months, and 77% expect this downward trajectory to continue. A similar picture emerges with regards to people’s personal finances, which 62% judge to have worsened over the same time period, and 59% expect this to continue over the coming year.

Mark Diffley, founder and director of Diffley Partnership said:

 “These are some alarming results with no silver lining in sight. Our polling finds extensive and, for some, acute anxiety over a cost of living crisis that is hitting people across all parts of society. A majority of people in all forms of work say that their incomes simply aren’t going far enough, and the picture is even more alarming for those out of or unable to work.”

Susan Murray, Director of the David Hume Institute said:

 “These findings draw attention to the urgent need for action to help those at the sharpest end of surging prices. A quarter of people across the country are losing sleep because of worry about their finances and over half of people are cutting back spending. The potential long-term impacts on the nation's health and economy are huge.”

ENDS

Notes to editors:

1. Designed by the Diffley Partnership, the survey received 2,203 responses from a

   representative sample of the adult population, aged 16+, across Scotland. Invitations were

   issued online using the ScotPulse panel, and fieldwork was conducted between the 5th - 9th

   May 2022, and received 2,170 responses from the adult population, aged 16+, across

   Scotland. Results are weighted to the Scottish population (2020 estimates) by age and sex.

2. About Understanding Scotland: Understanding Scotland is a high-quality quarterly survey

   that delivers insights into Scottish behaviours and attitudes towards society, the economy

   and the environment. The survey fills a vital gap in research, providing the socioeconomic

   insights and indicators needed for effective decision-making, with regularity and timeliness.