Cost of living squeeze hitting pension saving in the UK's biggest cities

  • Nearly half of retirement savers in the UK's biggest cities blame the cost of living for not being able to save more
  • Savers in Sheffield contribute the highest proportion of their monthly earnings to a pension
  • Brighton's workers have saved the smallest total pension pots despite having one of the highest average annual incomes in the country

Debt among younger generations could fuel a future retirement crisis according to newly-released research from Prudential. The new in-depth study of pension saving among people aged 21-65 found that nearly a quarter (24 per cent) of under-40s say they cannot afford to save into a pension. The cost of living is the most common single factor preventing people who live in cities in the UK from saving more into their pensions - and it is savers in Brighton, Bristol and Cardiff who are feeling the pinch the most, according to new research1 by Prudential.

The findings - which are taken from Prudential's exclusive research comparing attitudes to finance and the preparations workers are making for retirement in the UK's biggest cities - show that nearly half (49 per cent) of pension savers blame the cost of living for not being able to save more. However, in some places around the country the picture is much worse, for example, the figure for those living in Bristol is 66 per cent, in Brighton it’s 62 per cent and 60 per cent in Cardiff.  

The cost of living has the lowest impact on retirement savers in Liverpool where there is an even split between the 35 per cent who say it stops them saving more, and the same proportion who say not being paid enough is the biggest barrier to making pension contributions. In Bristol half (50 per cent) of workers say they are not paid enough to save more for retirement, the highest proportion among the UK's largest cities. 

The research identified Sheffield as the city where savers contribute the highest proportion of their monthly income to their retirement savings. Savers in the South Yorkshire city pay on average 11 pence out of every pound they earn into a pension, totalling £211 per month. Meanwhile, up the M1 in Leeds, savers contribute the smallest proportion of their income to pensions - under five pence per pound earned.

Across the UK's largest cities the average monthly pension contribution is £150, representing 6.5 per cent of the average monthly wage2 of just over £2,300. Londoners make the highest monthly contributions of £226, while Sheffield (£211) and Newcastle (£210) are the only other cities where average contributions are greater than £200 per month. At the other end of the table of contributions, the people of Plymouth, Nottingham and Leeds save on average less than £110 per month towards their retirement.

Stan Russell, a retirement income expert at Prudential, said: "Saving for retirement can seem like a luxury when the cost of living is putting household income under pressure. However, it is important to remember that pension saving is for the long term and even the smallest amounts saved have the opportunity to grow significantly over your working life.

With a large proportion of people in some cities admitting that they could afford to save more towards their retirement, many could benefit from a consultation with a professional financial adviser to help them set a savings budget and a retirement income goal.

It is encouraging that the retirement saving message is getting through, with our research showing the average amount saved monthly by those living in our major cities now standing at £150. But as life expectancy increases, the responsibility to provide for retirement will shift more and more to the individual and the best approach for most people is to simply save as much as possible from as early as possible in their working life."

Within the UK's major cities the value of the average pension pot is £49,200. People in London have the biggest funds, with over £82,200 in savings, followed by Edinburgh (£68,400) and Liverpool (£60,400). Savers in Brighton have the smallest average pension pots (just over £16,400), perhaps underlining their concerns about the cost of living in the city impacting their ability to save, as the figures show that they actually enjoy the UK’s third highest average annual earnings at just over £28,200. London (£36,300) and Edinburgh (£29,800) are the only large cities where average earnings are higher.

The Prudential study also found that nearly a third (32 per cent) of all savers admit they could afford to contribute more towards their retirement - but that percentage is much higher in Sheffield (46 per cent), Edinburgh and Manchester (42 per cent) and Newcastle (41 percent). 

View infographics for each city

Infographics illustrating the results for each of the UK’s largest cities are available on request. 

1 Research conducted by Opinium on behalf of Prudential among 2,237 UK adults, including at least 50 from each of the UK’s 17 biggest cities, between 12 and 22 August 2016. 

2 Analysis of mean annual wages by city based on figures published by the ONS Annual Survey of Hours and Earnings (ASHE), published 18 November 2015