Nearly 12 million UK workers are not saving enough to ensure they can maintain their standard of living in retirement, according to research published by the Department for Work and Pensions (DWP).
Its Scenario analysis of future pension incomes research, found that, of the 11.9 million ‘undersavers’, nearly half are at least 80% of the way towards achieving their retirement income target, while only 8% are less than 50% of the way there.
The research also found that maintenance of the triple-lock guarantee, which was introduced by the government in 2010, into future years will prevent the number of ‘undersavers’ from increasing further.
It also found:
- Further action to increase employment levels among people aged between 50 and the state pension age has an important role to play, as does discouraging people from opting out of workplace pensions.
- Increasing contributions paid into workplace pensions could have a positive impact on reducing undersaving.
- Higher income groups could benefit significantly from higher contribution rates, but if set too high, these could prove punitive for lower earners and encourage more people to opt out of workplace pensions entirely.
The DWP considers that further work is needed to consider pension contribution rates that strike the right balance between providing improved retirement outcomes for all but do not have a detrimental impact on working life incomes.
Steve Webb (pictured), pensions minister, said: “This Coalition government’s reforms of the pensions system will make a huge difference to the long-term financial prospects of most working age people.
“But while the state will always provide a decent safety net so people can get by, anyone wanting to see their standard of living maintained into old age needs to make their own provision too.
“This new research shows that by saving just a little more, a huge number of working people could make their future retirement so much more comfortable.”