One of the biggest findings from our inaugural Nucleus Retirement Confidence Index was people potentially overstating their confidence levels when it comes to retirement. Another was the importance of planning and advice.
Having a plan in a place and a qualified adviser to shape it and revise when necessary can inspire confidence.
We found the closer someone gets to retirement, or once they have actually accessed benefits, then confidence levels broadly increase. Respondents made comments around knowing their income and expenses and being comfortable with that balance.
It stands to reason that someone can appreciate what their situation is likely to be if they have already had a taste of it, rather than it being a projection on a computer screen or piece of paper.
But worryingly some groups expressed high levels of confidence without much justification and cited potentially naive reasons for how they would secure an income in retirement, which would not be recommended by a financial adviser.
With us living in uncertain times, even those with more reason to feel confident than some may decide to step back and reconsider.
Updated retirement living standards published this month revealed the income needed in retirement has jumped as costs have increased and expectations have shifted.
The Pensions and Lifetime Savings Association estimates the minimum retirement living standard has increased from £12,800 to £14,400 for a single person and from £19,900 to £22,400 for a couple.
For a moderate retirement living standard it has jumped from £23,300 for a single person to £31,300 and a couple would now require £43,100, up from £34,000.
And for what the PLSA deems a comfortable retirement we’re now looking at £43,100 for one person (up from £37,300) and £59,000 for a two-person household (up from £54,500).
This could have a major impact on confidence levels.
As Alistair Cunningham, financial planning director at Wingate Financial Planning, summed it up in our study: “The reality is that many people should be unconfident – this is because their plans may not be fully considered, and they may not have enough, nor be saving enough for a comfortable retirement.”
Overconfidence can be a dangerous thing. Can consumers be genuinely, and rightly, confident in their financial future without either a plan or a financial adviser?
The truth of the matter is for all but a very few people: meaningful, informed retirement confidence requires the input of regulated financial advice.
If we want to get more people to understand why they are saving and what for, they need to feel empowered in an environment of trust and stability.
It is one of the many reasons Nucleus has called for an independent long-term savings commission.
We will be paying close attention to how confidence levels change when we revisit our Retirement Confidence Index study later this year.
