Articles FinancialPensionsWill Your Pension See You Through Retirement?
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Will Your Pension See You Through Retirement?

By Silverhairs editor May 27, 2012

Have you prepared yourself sufficiently to be financially stable, in readiness for retirement?  

UK pension savings have hit their lowest level in at least eight years, with only 46% of people saving enough for their retirement, according to the latest research from Scottish Widows.

The worrying research said the number of people saving adequately, defined as putting by at least 12% of their income or expecting a retirement income from a final salary pension scheme, had dropped by five percentage points since last year and by eight percentage points since 2009.

It was the eighth year Scottish Widows had undertaken the survey, and it said this was the lowest level it had recorded in that time. The drop was seen across all age groups and income levels among the 5,200 adults surveyed, and there was an increase in those saving nothing at all. Among those aged between 30 and the state pension age who earned more than £10,000 a year, 22% said they were saving nothing for retirement.

The survey also revealed a big difference between what people hoped to live on in retirement and what their savings might achieve. Although savings levels had fallen, the average annual retirement income they aspired to increased by £200 from 2011 to £24,300. 

However, the average total savings pot now stands at £150,000, which would only buy a retirement income of £5,700 a year. To meet current expectations, the average saver would need to put by an additional £4,500 a year.

Ian Naismith the head of market development for Scottish Widows, said: “With an ageing population, and ongoing economic difficulties, it has never been clearer that we need to do more to shift people quickly from their unrealistic, rose-tinted expectations of retirement. They must either increase their savings substantially or change their expectations of when they might retire and how much income they will receive.”

The survey found that for 73% of people other financial commitments were prioritised above paying into a pension. For 30% the priority was paying off debts, 40% cited general living expenses and 16% said they were paying for holidays and travelling before saving.

Tom McPhail, head of pensions research at the investment firm Hargreaves Lansdown, said:

“The kind of messages we should be putting in front of every adult of working age are that it pays to save and that any delay just makes the hill steeper to climb.  Every pound of weekly saving a 30-year-old makes today will deliver around £3 of income in retirement; however, a delay of just five years in starting to save would reduce that retirement income from £3 a week to £2 a week.”


He added: “We need to recapture a savings culture in this country; we should all be thinking in terms of ‘for every £10 I earn, I’ll give £1 to my long-term savings’.”  

UK pensions are being hit by the turmoil in the eurozone. Falling stock markets are taking their toll on funds, while the flight by investors to safe assets like gilts is pushing down annuity rates. In addition with the current recession a lot of people just have not got money to place into pension pots and have been worried by the current economic turmoil.

These factors could well put more people off investing, but changes to the pensions system due to begin in October will see workers without pensions automatically enrolled into company schemes.

McPhail said: “Hopefully auto-enrolment will help to kick-start the solution, however it needs to happen soon. The government should be working more closely with the industry and with regulators to look at what policy interventions are needed to drive up savings rates.”

 

 Does reading this make you feel concerned about your future, or are you prepared?

 

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