Fewer than half of people in the UK are saving enough for retirement
Fewer than half (45%) of those who could and should be preparing financially for their old age* are currently saving enough**, according to the ninth annual Scottish Widows Pensions Report. One in five Britons (20%) are saving nothing at all for their retirement and over a third are 'under-saving' either somewhat or severely, the study of 5,200 UK adults found.
Unrealistic and underprepared
Despite UK pension provision falling to a lower level now than at the height of the recession (adequate provision stood at 54% in 2009) the nation's aspirations for their retirement income have actually increased by £700 per annum from 2012 to 2013. The findings show that the average level of annual income people would feel comfortable living on at 70 years-old is now £25,200 (from £24,500 in 2012)
Based on this year's average savings levels, an average person retiring at 65 could receive under half the amount that they want***. The total pot for an average saver could be around £122,000 in today's terms, which might provide an annual pension of just £3,860. With the addition of the state pension, this would generate a yearly income of approximately £11,400, falling drastically short of the £25,200 annual income people are looking for and equating to a total pension fund shortfall of about £430,000.
Indebtedness in old age
This year's research found that we are entering retirement with an increasing number of credit commitments, including loans, mortgages and credit card debt. Almost 5.3 million (24%) Britons aged over 50 have a mortgage, over one in four (25%) have credit card debt and one in 10 (8%) have an unsecured loan. Out of those who are already retired, a third (32%) are still paying off debts and excluding mortgage debt, the average amount owed is £5,682.
Marta Phillips OBE CA, Chief Executive of the Pensions Advisory Service said:
“Everyone should try to save as much as they can, as often as they can, for as long as they can. Even saving a small amount can make a difference when you come to retire. Joining your workplace pension is a good place to start as you will also benefit from your employer's contributions and tax relief. Anyone who needs help or has questions about how to save for retirement, can call our helpline on 0845 601 2923.”
See our section on 'saving into a pension' for information about saving for a comfortable retirement.
*These are based on those who could and should be preparing financially for retirement - those aged 30 or over, who are not retired, and earning at least £10,000 a year.
**Saving adequately is those saving at least 12% of their income or expecting their main retirement income to come from a defined benefits pension
***An average saver is calculated on £25,000 average salary and 9.1% saving rates between age 30 and age 65. Pension projections are based on the Money Advice Service pensions calculator, using a 5% assumed growth rate.
The Scottish Widows UK Pensions Report, which first launched in 2005, monitors pensions savings behaviour annually using the Scottish Widows Pensions Index and the Scottish Widows Average Savings Ratio. The research was carried out online by YouGov who interviewed a total of 5,216 UK adults over the age of 18 in February and March 2013.