Adapting retirement plans in response to the cost of living crisis

Adapting retirement plans in response to the cost of living crisis

The rising cost of living raises concerns about the potential effect on pension contributions and whether it may prompt savers to re-evaluate their retirement strategies. A recent Trafalgar House study delves into whether UK savers are being forced to adapt their retirement plans in response to the cost-of-living crisis, and to what extent they have had to consider reducing their pension contributions as a result.

In this blog, we look at two key findings from the research and explore how UK savers are navigating their pension savings journey amidst considerable financial pressure.

Key findings:

• The majority of UK savers prioritise pension contributions despite financial challenges.
  Our research reveals that 18% of respondents have considered reducing their pension contributions due to the rising cost of living, while nearly two-thirds (64%) are unlikely to make any changes. Interestingly, 12% of respondents reveal that they have already decreased, ceased, or opted-out of their pension contributions due to financial strain. Although this is not an ideal outcome, pension contributions fare considerably better when compared to personal spending adjustments, with more than half (54%) of people indicating they would cut back on holidays and socialising before pension contributions.
• Savers are delaying retirement and using alternative savings sources
  The research also shines a light on the practical and cautious measures savers have taken to safeguard their long-term savings. It was found that 12% of respondents have postponed their retirement plans due to financial concerns, while 17% reported tapping into other savings or income sources to supplement their pensions. Although the majority of UK savers (64%) stated that they do not intend to alter their retirement plans, our findings show that some savers have already been compelled to adjust their retirement and long-term saving strategies. This highlights the very real impact that rising living costs is having on pension savings.

The research offers a valuable insight into the way UK savers have adapted their pension contributions and retirement plans in light of the rising cost of living. While a majority continue to prioritise pension savings, it is evident that some savers have already been forced to make adjustments, including delaying retirement or tapping into alternative sources of income. This simply underscores how important it is to measure, monitor and analyse the impact that the cost-of-living crisis is having on retirement planning for UK savers as well as continuing to communicate the value of pensions.