Over half (57 per cent) of UK pension savers are building up retirement savings outside of their pension, with a heavy reliance on cash, raising concerns about long-term outcomes, research from Interactive Investor has revealed.

The investment platform found that adults were saving for retirement outside of a pension, using a mix of cash savings, stocks and shares ISAs, buy-to-let property and other investments to build long-term wealth.

While the trend points to broader engagement with retirement saving, the findings highlighted what Interactive Investor described as a “worrying” over-reliance on low-yielding cash for long-term goals.

Indeed, the research showed that people are more than twice as likely to save for retirement in cash (43 per cent) than through a stocks and shares ISA (21 per cent).

Among Interactive Investor’s own customers, the tendency to save outside a pension was even more pronounced, with 78 per cent doing so, compared with 57 per cent of the wider population.

Interactive Investor senior manager, Camilla Esmund, warned that the findings reflected growing pension disillusionment, driven in part by ongoing uncertainty around policy and regulation.

“The pension landscape has been firmly in the spotlight over the past year, especially in the months leading up to last month’s hotly anticipated Autumn Budget,” she said.

“Speculated reforms to the retirement landscape raised concerns over the future of pensions, potentially undermining them as an important tool for long-term financial resilience,” but Esmund stressed that “this isn’t a recent phenomenon.”

Indeed, she argued that repeated changes to pension rules were eroding public confidence and discouraging long-term saving.

“It’s clear from our research that the constant tinkering of the pension rules is harming public trust in pensions, disincentivising retirement saving, and risks widening the glaring pension engagement gap we have in the UK,” Esmund added.

“Without urgent action to support savers, millions may reach later life without enough money to live comfortably.”

With this in mind, Esmund stressed that pensions remained a central pillar of retirement planning, citing benefits such as employer contributions, tax relief, tax-free growth, and the ability to take a 25 per cent tax-free lump sum.

Source: Pension Age