This summer, as the country emerged from the last lockdown, Scottish Widows published its annual Retirement Report. It’s one which takes in a whole year of the impact of Covid-19, and while the economic impact of the pandemic has been fairly obvious, the knock-on effects on individuals and their financial lives is less clear. Let us take you through some of the key findings.
Many people found themselves facing redundancy or furlough and as a result had to deal with a resulting reduction in their income.
On the flip side, some groups benefitted from saving money on their commute while they worked from home, and from reduced spending on leisure activities during the lockdowns:
2) Hardest hit groups:
50-59 year olds
Those in later middle age reported were less likely to experience the financial benefits of the pandemic such as decreased living costs. They were also more likely to be in self-employed or part-time roles than 25-49 year olds. These factors have contributed to the age group being more negatively affected by Covid than others:
This group were more likely to report job or income losses and less likely to benefit from reduced living costs and a higher proportion reported a deterioration in their financial situation as a result of Covid (30% of those earning £10,000-£20,000 compared with 19% of those earning above £50,000). They were also more pessimistic than others when looking to the future:
Covid has been devastating for the self-employed. While employees and businesses have had the benefit of government backed schemes such as furlough, grants and loans to cushion them from the financial effects of the pandemic, the Self-Employment Income Support Scheme was criticised by many for its eligibility criteria.
3) The upside
Many of those who experienced reduced living costs and avoided loss of work or income used the extra disposable income to improve their financial resilience:
Mortgage and other debt repayment, saving for large purchases, and supporting friends or family were some of the other ways extra disposable income was put to use.
4) Impact on retirement readiness
Auto-enrolment (AE) has had a positive impact on the number people saving adequately for retirement (this means saving at least 12% of their income), with the proportion rising from a low of 45% in 2013 to 61% in 2021. The Scottish Widows report suggests that despite the far-reaching financial consequences of the pandemic, people do not appear to have cut back on pension saving. This is encouraging, but many groups reported worries about running out of money during retirement and relying the minimum AE savings levels could result in a false sense of security.
Reviewing your pension saving, looking at affordability, making the most of the tax relief available and taking into account pots accrued over past employment will help you understand how well prepared you are for your retirement. LEBC advisers can help you understand whether your retirement plans are on track, and what to do if they aren’t.
1 Scottish Widows Retirement Report 2021, July 2021, https://www.scottishwidows.co.uk/about_us/media_centre/reports/retirement-report/
The information contained in this article is based on the opinion of LEBC and does not constitute financial advice or a recommendation to any investment strategy, you should seek professional financial advice before embarking on any course of actionBack to News & Views