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

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Abstract

This 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 as social ageing, individuals’ projection on their lifestages, may be more informative than age per se for understanding younger adults’ retirement saving behaviour. These findings have important implications for the policies that aim to increase retirement saving participation.
Original languageEnglish
Pages (from-to)2940-2967
Number of pages28
JournalAgeing and Society
Volume42
Issue number12
Early online date23 Apr 2021
DOIs
Publication statusPublished - Dec 2022

Keywords

  • retirement saving
  • young adults
  • financial resilience
  • saving behaviours
  • structural equation modelling (SEM)
  • Wealth and Assets Survey

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