Can't save or won't save: financial resilience and discretionary retirement saving among British adults in their thirties and forties

Ellie Suh

doi:10.1017/s0144686x21000337

Abstract

AbstractThis study examines retirement saving activity outside the state and workplace pension saving schemes among British adults aged between 30 and 49 on the premise that individuals are increasingly encouraged to save for their retirement in the new pension policy structure in Britain. The issue of under-saving among the younger adults has been studied with the focus on internal characteristics, such as undesirable attitudinal or behavioural tendencies (‘won't save’), or on external factors, such as income (‘can't save’). Building on these discussions, this study tests the role of internal characteristics and further examines the interplay between internal and external factors. The decision-making process for retirement saving is mapped based on the Model of Financial Planning with minor modifications. The analysis utilises the fourth wave of the Wealth and Assets Survey (2012/2014), and is conducted in the structural equation modelling framework. Results show that younger adults’ discretionary retirement saving is an outcome of a complex interplay between internal and external factors.Financial resilience, which indicates current financial behaviours and wellbeing, is found to be the strongest predictor for identifying a discretionary retirement saver, but it is closely connected to individuals’ income and home-ownership. The findings also suggest that social and economic arrangements are important to consider associal ageing, individuals’ projection on their lifestages, may be more informative than ageper sefor understanding younger adults’ retirement saving behaviour. These findings have important implications for the policies that aim to increase retirement saving participation.

Highlights

Societal ageing and changing economic environments have stirred up several discussions on the fiscal sustainability of the state and the employers’ ability to Downloaded from https://www.cambridge.org/core
This study, raises the following questions: If the younger adults are expected to save more for their retirement and make additional provisions, who is saving for retirement beyond the formal arrangements and who is not? How do they differ in terms of their attitudinal and behavioural characteristics related to retirement saving and, if so, to what extent? While this study examines the British context, these questions are relevant to other societies that have a comparable pension policy or are moving towards one, with an increasing emphasis on the individuals’ responsibility for retirement saving
Retirement saving in this study This study examines discretionary retirement saving activity outside state or workplace saving, which was previously described as voluntary retirement saving (Gough and Niza, 2011)

Summary

Introduction

Societal ageing and changing economic environments have stirred up several discussions on the fiscal sustainability of the state and the employers’ ability to Downloaded from https://www.cambridge.org/core. The decision-making process is mapped based on the Model of Financial Planning (Hershey et al, 2007), which is modified to examine discretionary retirement saving for British adults in their thirties and forties. Recent qualitative studies on British young adults, suggest that an increase in income may have a positive, but limited, effect on increasing saving through workplace pension schemes (PPI, 2018; Robertson-Rose, 2019).

Results

Conclusion