Page 14 - Savings Psyche
P. 14

Why save anyway?                                                strongly agree that they worry about their future financial
                                                                state, compared to 21% of those in or near the capital.
Earlier in this report, it was shown that the primary           Similarly, only 7% of baby boomers say the same.
motivations for saving broadly correspond with the methods
through which people save. Two particular statistics            Regional and age disparities, and their attendant concerns,
from that element of the research are highly relevant to        demonstrate the urgent need for a change of plan. Put
workplace savings schemes1, but the research reveals that       simply, a ‘one size fits all’ workplace savings plan is unfit for
regional and age variances are skewing the numbers.             a nation so diverse in its savings priorities.

Rising property prices and the fear of affordability being      The employer impact
overtaken by the cost of a deposit are causing some to put
property savings above retirement, particularly in London       Employers, of course, can only do so much to encourage
and the South East.                                             workplace savings. Yet while many offer a plan and
                                                                encourage take-up, The savings psyche of the UK suggests
Saving to get on the property ladder is a priority for 26% of   that the current approach is not working.
people in London and the South East (against 21% for the
remainder of the UK), while retirement is a focus for 43% in    The choice architecture available to employees is not
London and the South East (against 48% for the remainder        leading to the right savings behaviour, is not ending
of the UK).                                                     decision-making paralysis, and is making the path of least
                                                                resistance (essentially to do nothing) too easy to take.
Although those margins are fine, the message they portray       This is why over one-quarter of all workers have ‘little or
gains value when the London and the South East numbers          no interest about where to save their money’, either in the
are compared with areas where house prices are far              short term (29%) or the long term (27%).
cheaper, such as the East of England (14% property, 49%
retirement) and Wales (12% property, 49% retirement). Also      It would be easy to pass this behaviour off as lazy, or
noteworthy are the findings that 40% of people in London        negligent. Yet in reality, it is merely a reflection of human
and the South East would use their pension contributions        nature and these behavioural traits are compounded by the
to fund the purchase of their first house, versus 33% for       fact that the limited range of savings opportunities on offer
the rest of the country, and that London and the South East     is not right for the workforce, especially those who see
respondents report slightly lower numbers for holidays –        housing as a priority, and so are not inclined to pay into a
the overall most popular motivation for saving (UK without      workplace savings scheme that secretes their money away
L&SE 57%, L&SE 50%).                                            for four or five decades.

Meanwhile, the age statistics are less surprising, but no less  Employers can now affect how their employees save by
important.                                                      broadening the range of savings options to cover why and
                                                                how people want to invest their money, though in doing so
Perhaps due to the lower cost of housing when they              they must take into account the characteristics and diverse
were joining the property ladder, just 18% of Generation        economic and social circumstances of their workforce.
X respondents are motivated to save for property. That
doubles for Generation Y (36%), then climbs a little further
to 44% for Generation Z. For pensions, the numbers go the
other way, with 16% for Generation Z, 35% for Generation
Y and 46% for Generation X. (In the baby boomers
demographic, 7% save for property and 70% for pensions,
though as this generation is closer to retirement and more
likely to own a home, these statistics relate more to stage of
life priorities.)

Importantly for employee savings stakeholders, these
motivations driven by age and region are now affecting
how people feel about their future financial state. Only 14%
of people outside London and the South East say they

1. 47% of UK workers cite retirement as their primary reason for saving money. For 23%, it is getting on the property ladder or moving house.

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