Millions of pension savers 'risk being unable to afford a comfortable retirement'
Seven in 10 people think retirement income targets would encourage them to save more
Millions of pension savers are in the dark about whether they are on track for a comfortable retirement financially, a report warns.
Four in five people are not confident they are putting enough aside for later life, the Pensions and Lifetime Savings Association (PLSA) said.
This equates to 30.4 million working-age people across the UK who risk not being able to afford the lifestyle they want in later life.
The findings were made in the PLSA's Hitting the Target report - which aims to help people achieve better retirement incomes.
It calls for the introduction of retirement income targets
showing the lifestyle someone could afford on different levels of
income. The PLSA has commissioned researchers to develop these.
Seven in 10 people think retirement income targets would encourage them to save more, increasing to more than 78 per cent of millennials aged 18 to 34, the PLSA found.
While a third of people say they could save more for retirement, uncertainty about how much cash they will need may be holding people back, the report suggests.
Automatic enrolment into workplace pensions was introduced in 2012 to head off fears of a later life savings crisis.
Minimum contribution rates into workplace pensions are gradually being stepped up to encourage people to save more.
But many people wrongly assume that this minimum level is the target they should be aiming for to be comfortably off, the report found.
The minimum auto-enrolment pension contribution rate is 5 per cent, increasing to 8 per cent next year. Rates are made up of contributions from staff and employers.
Just over half of people wrongly believe the minimum rates are the recommended amount to save.
The report also said minimum contribution levels for automatic enrolment should be boosted from 8 per cent of band earnings to 12 per cent of total salary between 2025 and 2030, with at least 50 per cent of this coming from employers to ensure it is affordable for savers.
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.”
Around 1,500 people aged 18 to state pension age (SPA) were surveyed for the report.
Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said: “One of the most commonly asked questions in pensions is: 'How much do I need to save?'.
“A system of retirement income targets would help people to work out what sort of retirement they could expect if they save at varying levels.
“This would also enable pensions to be presented in a positive light as giving people choices over their quality of life in retirement, rather than trying to make people feel guilty about not saving enough - a strategy which has never worked in the past.”
Baroness Altmann, another former pensions minister, said: “It
is certainly true that people are not sure how much they should be
contributing to a pension, to secure themselves a comfortable
retirement.
“It is also very worrying that so many people think the auto-enrolment minimum levels are an appropriate amount - they are unlikely to deliver a large private pension.
“But most people need help with financial planning and would benefit from having an independent expert adviser to monitor their savings over time and recommend what they should do.”
She continued: “Pension planning is not an exact science and
your pension fund needs to be monitored regularly. If you do not have
enough saved, you could decide to keep working longer and save more.”
Speaking generally, Alistair McQueen, head of savings and retirement at Aviva, said that to build a decent-sized pot the insurer would advocate starting saving at least 40 years before retirement; saving at least 12% of earnings every month including employer contributions; and aiming to build at least 10 times annual earnings in a pot by retirement.
Mr McQueen said: “It's good to see the PLSA agree with Aviva's view that minimum automatic enrolment contributions should be increased from 8 per cent to 12 per cent of earnings by 2030.”
A Department for Work and Pensions spokesman said: “Automatic
enrolment was introduced so that people who were previously saving
nothing towards their retirement could start saving into a workplace
pension. Almost 10 million people have been enrolled so far.
“We have brought in phased contribution rate increases for workplace pensions and are committed to an ongoing review to ensure we continue to balance the need to save with everyday costs.
“For those who would like guidance on their pension, Pension Wise is a free and impartial government service which can help.”
Culled from Inedependent
Four in five people are not confident they are putting enough aside for later life, the Pensions and Lifetime Savings Association (PLSA) said.
The findings were made in the PLSA's Hitting the Target report - which aims to help people achieve better retirement incomes.
Seven in 10 people think retirement income targets would encourage them to save more, increasing to more than 78 per cent of millennials aged 18 to 34, the PLSA found.
While a third of people say they could save more for retirement, uncertainty about how much cash they will need may be holding people back, the report suggests.
Automatic enrolment into workplace pensions was introduced in 2012 to head off fears of a later life savings crisis.
But many people wrongly assume that this minimum level is the target they should be aiming for to be comfortably off, the report found.
The minimum auto-enrolment pension contribution rate is 5 per cent, increasing to 8 per cent next year. Rates are made up of contributions from staff and employers.
The report also said minimum contribution levels for automatic enrolment should be boosted from 8 per cent of band earnings to 12 per cent of total salary between 2025 and 2030, with at least 50 per cent of this coming from employers to ensure it is affordable for savers.
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.”
Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said: “One of the most commonly asked questions in pensions is: 'How much do I need to save?'.
“A system of retirement income targets would help people to work out what sort of retirement they could expect if they save at varying levels.
“This would also enable pensions to be presented in a positive light as giving people choices over their quality of life in retirement, rather than trying to make people feel guilty about not saving enough - a strategy which has never worked in the past.”
“It is also very worrying that so many people think the auto-enrolment minimum levels are an appropriate amount - they are unlikely to deliver a large private pension.
“But most people need help with financial planning and would benefit from having an independent expert adviser to monitor their savings over time and recommend what they should do.”
Speaking generally, Alistair McQueen, head of savings and retirement at Aviva, said that to build a decent-sized pot the insurer would advocate starting saving at least 40 years before retirement; saving at least 12% of earnings every month including employer contributions; and aiming to build at least 10 times annual earnings in a pot by retirement.
Mr McQueen said: “It's good to see the PLSA agree with Aviva's view that minimum automatic enrolment contributions should be increased from 8 per cent to 12 per cent of earnings by 2030.”
“We have brought in phased contribution rate increases for workplace pensions and are committed to an ongoing review to ensure we continue to balance the need to save with everyday costs.
“For those who would like guidance on their pension, Pension Wise is a free and impartial government service which can help.”
Culled from Inedependent
