Savings MOTs - hope for Squeezed savers

27 July 2016
In our latest research report, we look at how people who are currently struggling to manage their existing finances can take action to boost their retirement savings.

Royal London's 'Pensions Through The Ages: Generation 2050 and Beyond' research in 2015 highlighted significant undersaving for retirement, particularly in the 30 to 40 age group.

In the second of this series 'Feeling the Squeeze' we look at how we could help people who are currently struggling to manage their existing finances to make the savings they need.

Who are the 'Squeezed'?

Financial positions

Focusing on Generation 2050 Royal London commissioned further research with nearly 2,500 people aged 35-44, to really understand how their attitude to savings, the challenges they are facing and whether there are ways that they could achieve a better level of income in retirement to help live the lifestyle they hoped.

We found that over a third (34%) of this group considered themselves to be 'Squeezed', saying that they kept up with bills and repayments, but it was a constant struggle.

A further 37% considered themselves to be in the 'Manageable' group, where they are still struggling with their finances but only from time to time and 6% of the total surveyed considered their finances to be 'Unmanageable', and were having real difficulties and falling behind with bills and other repayments.

Desire to save

However more detailed analysis of this age group established that nine in ten, (92%) understood that they should be saving or investing. The problem is that the cost of living and other lifestyle priorities meant that any disposal income is being used to meet short-term financial commitments first. Over half (54%) say that they don't save more now because they just can't afford to do so.

They do however recognise that there may be opportunities to save in the future. This led us to identify a number of savings 'Moments of Truth' or MOTs, where action can be taken to boost their retirement savings.

Many of these MOTs aren’t about cutting back or scrimping now, they rely on them taking a decision and acting on that to redirect potential disposable income at key points in the future to actually save.

Moments of truth - MOTs

Increase in salary

Mentioned by over three quarters (76%) of those that are 'Squeezed' where they said they would save more. Nearly half (45%) expect this pay rise to come within the next five years.

End of debt repayment

Analysis of their spending showed that nearly half of the 'Squeezed' (44%) have a regular monthly outgoing to repay personal loan debt which they expect to repay in approximately six years. Nearly a quarter (24%) mentioned that they have a regular outgoing to cover finance such as a car, which they expect to repay in eight years.

For the 16% who repay both these amounts, this could free up an average £449 per month, of which they would be willing to redirect an average amount of £171 towards pension savings. This extra £171 per month, which would more than double their current average pension contributions, could secure a potential £50,0001 into their pension pot by the time they retire.

Other MOTs

Other potential Savings MOTs identified by the 'Squeezed' included the freeing up of potentially £14,000 in childcare costs in nine years' time and redirecting mortgage payments, once paid off, closer to retirement of £19,000.

It all adds up

The amounts that the respondents said could be freed up range from quite small amounts, such as reducing hobbies and treats to quite significant amounts as highlighted above. No matter the amount, it all adds up and could make a significant difference to the level of income available in retirement.

Rather than having a vague intention to do more later, identifying these Savings MOTs and making a definite plan to save when they occur could mean that some of the 'Squeezed' could change their financial position, so their finances are 'Manageable' when they reach retirement age and are not relying on the state benefits.

Financial advisers are in a key position to help. The recent online poll we conducted with advisers showed that nearly a quarter (23%) said that they had clients in this position who, if they were more engaged, could do more to improve their retirement planning.

So all really is not lost for this age group if they are prepared to commit to future action.

Further information

Download a copy of the full report Pensions Through the Ages, Feeling the Squeeze or get in touch with your usual Royal London contact.


1 The over £50,000 potential saving is based on the amount that the 'Squeezed' said they will aim to save for a person aged 39.5 with retirement age at 65; the loan repayment completed after 6 years so £98 per month saved for 19.5 years to retirement and the finance plan ending after 8 years so £73 saved for 17.5 years to retirement. This secures potential pension savings of £32,640 and £21,480 respectively, so £54,120 in total.

About the author

Steve Webb

Director of Policy and External Communications

Steve Webb is now Director of Policy and External Communications at Royal London. Before this he was Minister of State for Pensions between 2010 and 2015, the longest-serving holder of the post. During that time he implemented major reforms to the state pension system, oversaw the successful introduction of auto enrolment and played a key role in the new pension freedoms implemented in April 2015.

Last updated: 02 Nov 2017

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