Concerns over savers’ retirement adequacy have grown, after analysis from Hargreaves Lansdown found that retirement resilience has dipped and is expected to fall further in 2024 as house prices continue to fall and asset values do not rise in line with inflation.

Hargreaves Lansdown’s research suggested that middle income earners are set to be hit hardest, with retirement resilience scores for these groups expected to deteriorate by 1.6 and 1.9 points respectively, compared to a 1.1 point reduction for the highest earners.

The group suggested that this is because homeowners in these quintiles typically hold lower equity shares in their property making them more vulnerable to falls in house prices.

In addition to this, the rise in asset prices has failed to counterbalance the effects of rapid inflation on the savings required for a moderate retirement income.

Commenting on the findings, Hargreaves Lansdown head of retirement analysis, Helen Morrissey, stated: “Our finances have endured a rough ride in recent years with the cost-of-living crisis biting chunks out of our savings and spiralling inflation pushing up the cost of a moderate retirement.

"The percentage of households on track for a moderate retirement income has fallen back to 39 per cent and ongoing turmoil looks set to make life even more difficult in 2024.

"Inflation may have fallen from the eye-watering heights seen last year but remains much higher than the Bank of England’s 2 per cent target. This will continue to push up the amount people need to save for retirement at precisely the point in time when they may have less to put away.

"Added to this, the house price falls we started to see in 2023 look likely to continue with the latest data from the HL Savings and Resilience Barometer modelling the impact of a 5.9 per cent fall during 2024.

"Such a fall would have an impact across the board but would particularly affect middle earners who typically hold lower equity shares in their property and so are more vulnerable to falls in property prices."

Given this, Morrissey emphasised that home ownership is an important component of overall retirement resilience, as owning a home outright reduces day-to-day expenses compared to those of renters and also gives an asset from which to take income if needed.

"However, it’s important to say planning for retirement is a long-term game and though current circumstances are difficult it is important that those who are able to continue to save for the long term wherever possible," she added.

"If the financial strain of contributing to pensions has been too much, then it’s important to resume these contributions as soon as is practicable for you.”

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