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Survey Reveals Retirement Trends in the US and UK
The ING study shows changing retirement trends on both sides of the Atlantic

Published on February 21, 2019

A new study by global bank ING has revealed a changing approach to retirement planning in the United States and the UK. The results of the international survey, which covers almost 15,000 respondents in 15 counrtries, offers an important insight for globally mobile citizens as to how changes in working trends and attitudes are altering retirement plans on both sides of the Atlantic.

The study found that almost two thirds (64%) of Americans expect they will need to keep earning in retirement compared to just 54% of Brits. 64% of those Americans expect that additional earning during their retirement will be through the gig economy or temporary employment, compared with 58% of Brits. In the US, just two in five respondents (39%) of those not yet retired expect to have the same standard of living in retirement - this drops to a third of respondents (30%) in the UK.

The study also found that fintech is yet to have a major influence on investments in either the US or the UK, with only 21% of US consumers having used a mobile app to make an investment, compared to 15% in the UK.

James Smith, Developed Markets Economist at ING, explained that "There are many similarities between the US and UK, but one key difference comes from the recent introduction of UK auto-enrolment, a scheme which makes it compulsory for employers to sign-up their staff to workplace pensions ... According to the ONS, 73% of UK employees are now enrolled in a scheme[1] – a significant increase relative to five years ago - compared to around half of workers in the US[2]. This could be one reason why a lower proportion feel they’d need to keep earning in retirement, relative to the US"

Discussing the study from the US perspective, James Knightley, Chief International Economist at ING, said that "The global financial crisis continues to cast a shadow over parts of the US economy. In terms of the jobs market we have seen robust employment growth, but not the pick-up in worker pay we would typically have expected. The US is certainly not alone in experiencing this phenomenon, but there are finally some really encouraging signals. With unemployment close to 50 year lows and business surveys suggesting firms are struggling to fill vacancies there is growing evidence that the competition for labour is driving worker pay higher [3]. Firms are also increasingly offering more generous benefit packages, including on healthcare and pensions, according to the Federal Reserve [4]. Americans seem pessimistic right now, but if these trends continue attitudes may soon start to change."

Looking at the UK perspective, Mr Knightley commented that "In the ten years since the peak of the global financial crisis the cost of living, as measured by UK consumer price inflation, has gone up by nearly 25%, yet wages have risen only 21%. This squeeze on spending power explains much of the pessimism in the survey, which is then compounded by a sense of less job security and less generous private pension provision relative to previous generations. Nonetheless, wage growth is now picking up and if Brexit goes smoothly we could see the pound respond positively, helping to keep a check on inflation. More clarity for business may also encourage firms to hire permanent rather than temporary staff. We will have to wait and see if this translates into a more positive outlook in the coming year."

For more information on the ING study, go to https://think.ing.com/articles/earning-in-retirement-the-new-norm/

Footnotes:

[1] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/articles/pensionparticipationatrecordhighbutcontributionsclusteratminimumlevels/2018-05-04
[2] http://www.pensionrights.org/publications/statistic/how-many-american-workers-participate-workplace-retirement-plans
[3] https://www.nfib.com/foundations/research-center/monthly-reports/jobs-report/
[4] https://www.federalreserve.gov/monetarypolicy/beigebook201901.htm

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