How to ensure individuals save enough for their retirement has been the perennial question ever since the demise of defined benefit pension schemes. While the introduction of auto-enrolment in 2012 has resulted in more employees saving towards their retirement, the legal minimum contribution level of 8% is far lower than that required for many individuals to achieve their desired standard of living in retirement.
Research published by Now: Pensions in partnership with the Pensions Policy Institute last week, for example, found that nine million UK employees are significantly under-pensioned. Among under-pensioned groups, annual private pension incomes ranged from £3,650 to £6,750.
Ethnic minority group, women, single mothers, carers and those with disabilities all fell below the population average in terms of pension income.
Scottish Widow’s latest Retirement report, published this week, meanwhile, found that two-fifths (39%) of UK adults are not on track to achieve a minimum standard of lifestyle in retirement, with 1.6 million more people risking retirement poverty since 2023. Half of those surveyed know they are not saving enough, while a quarter of respondents in their 20s say they prioritise saving for emergency expenses.
After decades of working hard, none of us want to envisage a retirement spent living with such limited means, however, this will be the future for many. So, what is the answer?
We frequently see headlines highlighting the retirement crisis the UK is hurtling towards, amid startling reports of pensioner poverty. Yet, things seem slow to change. While some individuals may prioritise more pressing financial needs over saving for a distant retirement, others may simply be unable to afford to put more aside now due to high living costs, debt repayment and so on.
With many industry bodies, pension providers, financial advisers, employers and money experts all banging the drum to spread the message about the importance of saving for retirement, what is really needed to turn the situation around?
Arguably, basic financial education about budgeting and saving should begin long before individuals enter the workplace. However, with this unlikely to be the case for many, who should it fall to to help to plug the gap?
And should the focus now be on what can be done to support those who have, or are about to, reach retirement with inadequate pension savings?
Ultimately, these are not new questions and there is no disputing many are on track for a bleak future. The question now should be: how quickly can we turn the situation around for future generations of retirees?
Debbie Lovewell-Tuck
Editor
@DebbieLovewell
