Potentially some 30m working age people are failing to save enough for retirement and risk not being able to afford the lifestyle they want in later life, according to research from the Pensions and Lifetime Savings Association (PLSA) which suggests more needs to be done to educate pension savers on planning for their future
Its poll of approximately 1,500 individuals aged 18 to state pension age (SPA) in the UK found 80% are not confident they’re saving enough for retirement. This equates to 30.4m if scaled up to reflect the population as a whole.
While a third (34%) of those surveyed said they could save more for retirement, the PLSA says it is possible that uncertainty about how much income they’ll need is preventing people from doing so.
The government’s minimum auto-enrolment pension contribution level is currently 5%, increasing to 8% next year, and half (51%) wrongly believe this is the ‘recommended amount’ to save.
Similarly, 44% assume the level has been set to ensure everyone will be comfortable in retirement when in fact it is only to ensure as many as possible have the minimum they need to live off.
At present, half (51%) say they do not have enough time to plan for the future, but 74% think retirement planning would be much easier if the UK had retirement income targets, like the system currently used in Australia. Seven in ten (70%) even say targets would encourage them to save more, increasing to eight in ten (78%) millennials (18-34 year olds).
Nigel Peaple, director of policy and research at the PLSA, said: ‘Millions of savers are in the dark about whether they’re on track for the lifestyle they want in retirement.
‘With future generations unlikely to have the same levels of property wealth, or final salary pensions, as current retirees do, it’s vital more is done to ensure people can cover the costs of later life.
‘We want the government, pensions sector, and regulators to work together to take forward our recommendations and help many more people achieve the retirement they desire.’
As well as introducing targets, the PLSA’s recommendations for change include raising e the minimum contribution levels for automatic enrolment from 8% of band earnings to 12% of total salary between 2025 and 2030, with at least 50% of this coming from employers to ensure it is affordable for savers.
The association also wants the government to make it easier for people to supplement their retirement with income from borrowing against their home, and to keep working in later life, if they wish.
The PLSA’s report, Hitting the Target: A vision for retirement income adequacy is here.
Report by Pat Sweet