Is retirement confidence among SIPP savers misplaced?

Many SIPP savers are feeling confident about their retirement prospects. But are they right to be?

Our latest research – part of our At Retirement Reckoning study – suggests a concerning disconnect between confidence and preparation among those relying solely on Self-Invested Personal Pensions (SIPPs) to fund their retirement.

From a nationally representative survey of nearly 1,000 SIPP holders, almost two-thirds (63%) of SIPP-only savers told us they believe they’re on track for a comfortable retirement. That compares favourably to 55% of defined contribution (DC)-only savers, and confidence rises even further (to 81%) among those with a blend of SIPP, DC and defined benefit (DB) pensions.

"Almost two-thirds (63%) of SIPP-only savers told us they believe they’re on track for a comfortable retirement."

This headline confidence is encouraging. But dig a little deeper and the picture starts to look more like a mirage than a roadmap.

A confidence gap

Despite their optimism, only 18% of SIPP-only savers have set clear retirement goals or created a retirement budget. Even among those with a more diversified pension mix, fewer than a third have taken these fundamental planning steps. And while SIPP-only savers are more likely to engage with their pension providers or speak to a financial adviser than DC-only savers, many are still navigating their retirement planning alone.

"Only 18% of SIPP-only savers have set clear retirement goals or created a retirement budget."

Notably, just 27% have used online tools to model their future income needs. This suggests a significant proportion of SIPP savers may be investing for retirement without a clear understanding of how their decisions translate into sustainable long-term income.

As financial advisers will know all too well, confidence without clarity can be a dangerous combination.

The role of complexity

Part of the issue lies in the fragmented nature of retirement saving in the UK. Many individuals hold multiple pension types – DB, DC, and SIPP – each governed by different rules, benefits and risks. While SIPPs offer a high degree of flexibility and control, they also bring added complexity, particularly when savers are juggling other arrangements at the same time.

This complexity can easily obscure visibility, and more importantly, understanding.

The long-awaited pensions dashboards, including commercial variations in due course, should help individuals see their total retirement savings position for the first time. But visibility alone won’t be enough. Dashboards can shine a light on the problem, but they won’t solve it.

Bridging the gap with advice

For many people, the realisation that they may be off track will be an uncomfortable one. And while digital modelling tools will improve, they cannot fully replace professional support when it comes to turning insight into action.

That’s where advisers will play a crucial role – not just in helping clients to understand their options, but in building a plan that matches their aspirations with the reality of their financial position.

"As the retirement landscape continues to shift, the value of professional advice is likely to increase – not as a ‘nice to have’, but as a necessary step in making confident retirement outcomes a reality."

At Barnett Waddingham, we believe the challenge for the industry is twofold: first, to improve the visibility of retirement savings through tools like dashboards and modelling platforms; and second, to ensure the right support structures are in place to help individuals act on that information in an informed, confident and meaningful way.

As the retirement landscape continues to shift, the value of professional advice is likely to increase – not as a ‘nice to have’, but as a necessary step in making confident retirement outcomes a reality.

For further insights from our At Retirement Reckoning research, or to discuss how Barnett Waddingham can support you and your clients, please get in touch.