2 Financial attitudes in an economic crisis

**While people are different, it’s the same big issues that are likely to keep them awake at night.**

Most people hope for certainty of income – and want to avoid risk and debt

Our research shows that, in these difficult times, most people would prioritise certainty of income when it comes to their plans for retirement.

At the same time, they’re perhaps gravitating towards the core beliefs and behaviours they think will allow them to better stabilise their household finances. More specifically, the majority are rejecting the idea of taking on debt to see them through the crisis. We’re also seeing fewer differences in attitudes to investment risk across the generations.

Personal finances

78% hope for certainty of income in retirement

As people find their financial resilience under threat, it’s perhaps unsurprising that a significant majority put ‘certainty of income’ as being an important retirement priority.

More than two-thirds (68%) will also go as far as to say that an ideal scenario would involve them having enough guaranteed income to cover their essentials – but with some extra flexibility to cover other spending.

Perhaps most surprisingly is that non-planners place significantly less importance on having certainty of income in retirement than planners do (72% vs. 81%). This may suggest that some people in this group carry overly optimistic expectations about how their financial situation might look in their later years.

Approaches to investing

Around half (49%) prefer to take less investment risk

As market volatility dominates the daily news cycle, almost half of people say they’d rather limit their exposure to investment risk — even if it means they have less money over the long term.

What’s interesting is that this view is largely shared equally across gender, ethnicity, affluence and whether people take advice or not.

Where we do see more of a difference is between planners and non-planners (53% vs. 44%). Of all the groups, those who don't plan for retirement are the most likely to be comfortable taking more investment risk. This again suggests that they may be overly optimistic about their finances.

Attitudes to debt

74% of working people want to avoid taking on debt

Despite household incomes being stretched across the country, most working people want to avoid racking up debt as much as they can.

This strong aversion to taking on credit is even more pronounced with those who have already retired (89%).

Interestingly, household affluence has no bearing on people's current attitudes towards debt. In fact, those with a total household income of less than £30k hold exactly the same view as those who have combined earnings that surpass £100k.

Attitudes differ when it comes to financial positivity, spending and equity release

The day-to-day pressures on finances are of course affecting people in different ways.

Indeed, women, non-planners and those with lower levels of household income are likely to be shouldering the biggest financial worries and anxieties.

Interestingly, these groups are also among the least likely to consider using the value built up in their home to bridge any potential gap in their retirement finances.

Financial outlook

Less than half of people feel positive about their financial situation

The cost of living crisis has put household finances under significant pressure. And, since our research last year, there’s been a sizeable shift in the number of people who feel positive about their finances (dropping from 48% to 41%).

Where we see the biggest change is among women – who are now significantly less likely to feel assured about their current financial situation (moving from 42% down to 33%). And while financial positivity has dropped for all groups, planners are still almost three times more likely to feel better about their finances than non-planners (62% vs. 22% this year compared to 68% vs. 27% last year).

Sustainable spending

58% worry about spending too much now, in case they run out of money

As energy, fuel and food costs continue to rise, most people are worried that they might run out of money in the future.

Men are less likely to stress about their spending – but there’s little difference between those who take financial advice and those who don’t.

The benefits of making a plan can also be seen here, with planners being less likely to have concerns about running out of money than non-planners.

Funding retirement

33% feel comfortable taking value from their home to support their retirement

As people’s finances are being challenged on all fronts, their home could offer further means to help fund their life after work.

The possibilities of equity release would be of most interest to planners, those who take advice and have greater levels of household income. Non-planners and older generations would be the most reluctant to consider the idea.

Our findings also suggest there are cultural differences in terms of how people view their homes. Indeed, ethnic minorities are considerably more comfortable with the thought of accessing the equity in their home than white people.

Health and age anxiety

People are likely to worry most about their health in retirement

When people think of their life in retirement, around two-thirds (64%) prefer to focus on how things might look during the early stages.

But when they’re asked to consider the potential negatives, the biggest common fear is facing a decline in their health – though this has dropped slightly since last year (36% down to 33%).

The second most common fear people have about their retirement is getting or feeling old (32%).

Leaving an inheritance

65% want to leave an inheritance behind when they die

People who are more engaged with their finances, or have higher levels of household income, are more likely to want to leave an inheritance.

Looking across the different ethnic groups, black people are decidedly more inclined to want to pass something on when they die.

Despite a notable desire to leave an inheritance, we’ve seen a drop in the number of people we spoke to who say they’ve made a will, when compared to our research last year (down from 40% to 36%).

Family support in later life

24% think adult children
should give their parents
financial help

Almost a quarter of people think adult children have a responsibility to offer financial support to their parents.

Asians, planners and those with higher household incomes are the most likely to hold this belief.

Interestingly, it’s the youngest age groups who feel the strongest about giving financial help to their parents – though this view gradually dissipates as we move through each generation; perhaps as the reality of the costs involved begin to set in.

The nation's youngest pension savers fear isolation in retirement

Loneliness is the biggest fear 18-24-year-olds carry when thinking about their life after retirement (31%). When compared to other age groups, they're also the most likely to worry about the death of a loved one (22%) and feeling like they’ll lose their identity (14%).

Gender gap

The cost of living crisis has widened the disparity

The ongoing economic uncertainty appears to be having a bigger impact on women than men.

Indeed, right now, women are significantly more likely than men to say they’re finding their current financial situation difficult (31% vs. 19%).

This has had a bigger impact on their overall financial positivity – which, compared to last year, has fallen from 44% to 33%.

This is a much bigger drop than we’ve seen with men, whose financial positivity has drifted from 54% to 50%.

Gender gap (cont.)

Women are even more worried about their future financial stability

Women now carry even greater levels of anxiety around their future financial stability.

They’re more likely to be worried about spending too much and running out of money (65% compared to 59% last year). And they’re even more worried that they’re not saving enough for their future (58% jumping up to 66%).

If we were to contrast this picture with men – their worries about saving and spending have either remained exactly the same as last year, or we’ve only seen very slight movement.

Gender gap (cont.)

The gap in financial knowledge and confidence has also grown.

Men are still more likely than women to say they’re comfortable in their financial knowledge, as well as in their confidence to make good financial decisions. But the gap has grown since last year. The change is perhaps a symptom of the fact that women are now almost twice as likely than men to put no planning into their retirement (19% vs. 35%).

Not only that, but the number of women who say they put a ‘great deal of thinking’ into their retirement planning has dropped since last year (21% down from 23%). On the other hand, the number of men putting greater focus on into their plans for the future has grown (32% up to 35%).

Women are less optimistic about how long they can support their retirement lifestyle.

On average, women think they’ll be able to fund their retirement for three years less than men.

While financial confidence and planning have a role to play, women are also less likely than men to be saving into private pension (49% vs. 60%).

And, where they have been enrolled into a workplace scheme, they’re more likely to only be saving the minimum level of contribution than men might be (71% vs. 58%).