Retirement date is uncertain for 38% of Brits

Forget the usual plan of retiring at 65. New research shows that just under half of people aged between 55 and 64 have no idea when they will be able to retire.

A survey by Barings Asset Management has revealed that 2.1 million, or 44%, of non-retired Brits aged 55 to 64 do not know when they will be able to retire.

When non-retired adults of all ages were asked about their retirement plans 38%, or 13.5 million people, did not know when they would be able to retire.

This is in stark contrast to a survey Barings undertook in 2008, which showed that 100% of non-retired adults were confident they would be able to retire and only 1% did not know at what age they would do so.

Uncertainty on the rise

Although the changes from 2008 show huge differences, there are also worrying year-on-year trends. Last year 30% of 55- to 64-year-olds were unable to say at what age they planned to retire, which has increased this year to 44% – a jump of 660,000 adults.

For the third of adults who do not have a pension, their retirement age is even more unknown as they will have to rely on the state pension. A total of 30% of 55- to 64-years-olds do not have a pension, up from 26% last year.

There is also a gender gap, with 43% of women failing to save into a pension, compared with 29% of men. Unsurprisingly, the 18 to 24 age group has the highest percentage of people without a pension – 69% are not yet saving.

Marino Valensise, chief investment officer at Barings, said: ‘For a worryingly large proportion of the British population, retirement is very uncertain. A significant number cannot afford to retire, owing to a combination of increasing longevity, a decline in the value of annuities and a lack of pension savings.

‘Particularly concerning is the fact that such a huge proportion of people aged 55 to 64 do not know when they will be able to retire. It is likely that these people will have suffered pension losses in recent years due to the financial crisis and therefore need to work longer to recoup funds.’

Pension strategy

Uncertainty over retirement dates also affects the investment strategy of pensions. Many people opt for the default pension strategy where they do not have to pick funds – often the default uses lifestyle funds, also known as target date funds, which work towards providing a certain return at an arbitrary retirement date.

These funds may be beneficial for those who know when they are going to retire, but for those who do not they are playing ‘a multibillion-pound game of pin the tail on the donkey’, said Laith Khalaf, pension investment manager at Hargreaves Lansdown.

‘To be fair these [lifestyling] strategies, in the absence of investors taking any action themselves, are the best default solution we have got,’ said Khalaf.

‘However, changing retirement trends, an increased focus on different ways to draw your pension, and an almighty gilt bubble make this already clumsy solution look worse by the day.’