Ticking timebomb for future finances
That’s according to the fourth annual Financial Planning Survey, commissioned by the Institute of Financial Planning in association with National Savings and Investments for UK Financial Planning Week, which takes place 21-27 November.
Financial Planning Week is the national campaign organised by the IFP, its members and supporters to raise awareness amongst the general public of the importance of financial planning.
It also aims to encourage people to take action to improve their financial “fitness” and help them achieve the life they want, and also help them to find professional help and advice should they require it.
The survey, which was conducted by YouGov for Financial Planning Week and which questioned over 2,000 people across the UK, discovered that retirement plans for many Brits now hang in the balance as they struggle to pay down debt while worrying about their financial future:
- Only 19% – just one in five people – believe that they are saving enough for their future needs
- Almost half (47%) of Brits are not confident that they’ve saved enough to live comfortably then they retire. Women are particularly at risk with the majority (55%) falling into this category.
- 14% have never made any pension contributions, and a further 31% are not currently contributing to a pension plan of any sort, however, they have contributed in the past.
- Two thirds (66%) of women and over half (54%) of men surveyed say they worry about money either always or most of the time.
- Three quarters (77%) of respondents believe that they would be happier if they had more money
- Looking ahead to what age the panellists think they will be able to afford to retire, one in ten (10%) think they will “never” be able to, including a worrying 12% of over 55s.
Despite concerns over their future standard of living in retirement, many people are not planning to put money into pension plans to try to improve their position, or may not even be aware that they need to. Around 41% say they would consider making additional contributions into pension plans to avoid delaying their retirement due to the planned increases in the state retirement age.
When asked about their day to day budgeting, it appears that many people are feeling the pinch. 29% of men and 22% of women surveyed in 2011 report they are not even setting out a clear budget compared to 30% of men and 25% of women in 2010.
The majority ( 53%) of respondents report that their household finances have got either a bit or much worse over the last six months compared to just 43% in the same period last year. With UK inflation at a three year high, this pain looks unlikely to subside any time soon.
In 2010, 45% of people reported that they had a financial plan which they drew up and reviewed regularly. In 2011, this remained relatively unchanged with 46%. The likelihood of having a financial plan in place increases with age (39% of 25-34 year olds to 53% of over 55s).
Yet people are reluctant to seek professional help when it comes to their finances. When asked about how they proposed to improve their future financial position, only 4% said they would get professional help. The most popular response was to reduce debt (33%) but alarmingly, 14% said they had no idea how they would improve their situation.
When it comes to thinking about the benefit of using professional financial advisers, more than a quarter asserted that they couldn’t think of any benefits (27% in 2011, 26% in 2010) 28% find the fact that an adviser can research the entire market and recommend the most appropriate investment products to be attractive, whilst 23% appreciate that advisers can help them unravel the complexities of the financial world.
While 17% say it is likely that they will seek advice from an IFA over the next six months, only 15% felt that professional help would give them peace of mind that their financial affairs are in order and being monitored regularly.
As in 2010, people still lack confidence when it comes to saving or investing their hard earned cash. This year however sees the greatest proportion of respondents feeling most confident putting their money into deposit accounts with building societies and banks (44% and 39% respectively) for savings up to £85,000 (the new deposit compensation limit).
When it comes to equity investment, half (50%) of respondents are not confident about investing into the UK stock market, with 54% not confident about investing in global markets.
Nick Cann, CEO of IFP commented: “Yet again this year, our survey findings present a worrying picture for so many people who are facing an uncertain future yet not taking appropriate steps to improve their financial situation.
“Whilst accepting that there are things that consumers can do themselves, the services of a professional financial planner are invaluable to help the consumer get the context that they need when planning their finances, and their lives, effectively.”