A growing number of working adults believe they will never be able to afford to retire, according to new research from financial wellbeing specialist WEALTH at work.

The survey found that nearly half (45%) of workers now think retirement is financially out of reach — a marked increase from 39% last year and 33% in 2023.

The concern is particularly acute among those aged 35 to 44, with over half (51%) in that cohort believing they will never have enough to retire.

The cost of living crisis appears to be driving much of this pessimism. Four in five (81%) respondents said rising living costs will make them less comfortable in retirement due to a shortfall in pension savings.

A similar proportion (80%) feared they would need to work longer to compensate, with nearly a third (32%) already planning to delay retirement — a figure that rises to 35% among those aged 55 and above.

Jonathan Watts-Lay, director at WEALTH at work, pointed to the compounded effect of economic pressures and structural shifts in pension provision: “Workers are getting increasingly concerned that they’ll never be able to afford to retire, with the research finding this peaks for those aged 35-44.

“Most of this group will not have benefited from a full working life of automatic enrolment and are less likely to reach retirement with generous defined benefit (or final salary) pensions than some older generations.”

He continued, “For people to better prepare for their financial future, it’s vital that they engage with their pensions as early as possible.

“Many don’t realise the significant difference a small increase to their pension savings can make.”

CONSIDER LIFESTYLE ADJUSTMENTS

Watts-Lay highlighted that for someone in their twenties, contributing just 1% more of their salary each year could boost pension savings by as much as 25% over time. He suggested that lifestyle adjustments — such as budgeting, switching utility providers and making use of workplace benefit schemes — could help workers find extra funds to invest in their retirement.

The research also revealed a widespread lack of understanding about how pensions work. One in five workers did not realise their pension is invested, while 30% were unaware they could choose how their pension is invested — a figure that rises to 38% among the over-55s.

Furthermore, 39% did not know what their pension is currently invested in, and a quarter were unaware that if no active choice is made, their money is invested into a default fund by the provider.

Despite this knowledge gap, more than half (54%) of respondents had considered investing in line with their personal values, such as environmental or social concerns. However, only 24% had followed through on this intent.

Encouragingly, 41% said they would be more likely to increase their pension contributions if their investments aligned with their beliefs — a figure that rose to 53% among younger workers aged 25 to 34.

The study also identified a shortfall in workplace support. Just 16% of workers said they turned to their employer for pension guidance, and 10% said they had no one to turn to at all. Over a quarter (26%) felt unsupported by their workplace when it came to understanding their pension.

Watts-Lay warned that a lack of financial literacy could have lasting consequences, especially for those nearing retirement. “What is particularly concerning is that almost two-fifths of those approaching retirement (aged 55+) are unaware that they have a choice of investment funds to choose from.

“At this point of their life, people need to start considering how they plan to generate a retirement income… and ensure their pension investments or ‘glide path’ is aligned with this.”

He also noted the growing role of Environmental, Social and Governance (ESG) investing in raising engagement levels, describing the trend as a “powerful way to switch people on to better engage with their long-term savings”.

Watts-Lay concluded that employers have a crucial role to play in supporting their staff’s financial wellbeing: “For people to achieve better outcomes at retirement, they need support to understand not only their pensions but their general finances… Many leading employers recognise this and provide financial wellbeing support in the workplace.”