There will be winners and losers from a two tier retirement system, according to new research looking at differing approaches to retirement.
The research has been published by Octopus Investments and found that people’s approach to retirement planning dramatically changes once they earn more than £50,000.
The study, which was carried out by Opinium, highlights that the UK is in danger of creating a ‘two tier’ retirement system with clear winners and losers.
The research shows that there is a step change in people’s confidence, expectations and behaviours when it comes to planning for their future for those earning between £50,001 and £60,000 compared to those earning under £50,000.
Meanwhile, the raft of recent pension changes, far from giving people the sense of ‘freedom’ over their financial planning, has dented the confidence of a quarter of Britons nearing retirement.
Key findings from the research included the expectation of exceeding the pensions lifetime allowance leapt from 14% to 63% once earnings exceeded £50,000 a year.
14% of people earning £40,001 to £50,000 expect to reach the pensions lifetime allowance limit, jumping to 63% for those earning £50,001 to £60,000 a year.
[tweet_box]Majority of people earning over £50,000 a year expect to reach pensions lifetime allowance[/tweet_box]Another finding in the research found those earning more than £50,000 a year are more likely than those earning less to seek financial advice on their retirement plans.
Around 1 in 2 people in the higher income bracket (£50,001 to £60,000) have taken financial advice on their retirement plans versus 1 in 5 earning less than £50,000 a year.
Financial advice often has greatest value for people with higher earners or greater assets, although it can of course offer value to anyone with clear financial goals for the future.
Those earning are also more likely to support their plans for retirement by considering alternative investments, such as Venture Capital Trusts (VCTs).
Octopus found that only 9% of people earning less than £50,000 a year use or plan to use Venture Capital Trusts in the next year for their retirement planning, compared to 38% of those earning £50,001 to £60,000 a year.
The research rightly highlights the risk of winners and losers emerging from a two tier retirement system, with some groups planning for their future and seeking specialist advice, while others do nothing.
Retirement planning should not be the preserve of the very wealthy, as everyone needs to make provision for the future.
