Only 7% of the UK on track for retirement
· Nearly two thirds (62%) do not feel confident about being able to retire when they want to
· More than half (55%) of people in the UK admit to having never checked their pension savings
· Two in five employees don’t know how much they’re paying into their pension pot
· And yet, people expect to retire on an annual income that would require more than £1m of savings
New research from Aegon UK reveals that just 7% of the UK population are on track for the retirement they aspire to, exactly the same percentage as in April 2014.
Aegon’s third UK Readiness Report – the latest in a series of reports that looks at attitudes towards retirement, has a particular focus on levels of engagement with workplace pensions. It finds that the nation’s readiness score has actually fallen over 12 months from 52 to 47. People want to retire at age 63 and this fall is due to people’s expectations about the amount of money they hope to retire on each year rising from £35,000 to £42,000 – despite the fact that this would require a saving pot of more than £1m, a sum higher than the new pension lifetime allowance.
The lack of preparation for retirement should be set against the backdrop of large scale change in the pensions industry. More than five million people have now been auto-enrolled into a pension scheme by their employer in an attempt to improve retirement readiness.
However, 41% of employees don’t know how much of their salary they’re contributing to their pension pot, and 59% say they have no idea how much their employer is contributing. On top of this, half of the UK’s workers have no idea how much they have saved into their company pension so far. 35% of those in employment don’t even know whether they’re eligible to be auto-enrolled into a company pension.
Half of all respondents have never done anything to review their retirement plans, and 55% have never checked the performance of their retirement savings. It is therefore perhaps no surprise that less than two in five (38%) feel confident about being able to retire at their target retirement age.
There is however positive sentiment about the idea of having a workplace pension and the desire to save for the future. 79% plan to rely on their workplace pension as their main source of post-retirement income, and just 6% said they’d leave the auto-enrolment scheme when the minimum contributions rise to 5% in 2018. In fact one fifth said they would go so far as to increase the amount they saved beyond the minimum requirement.
David Beattie, managing director, Aegon UK Direct said, “It is deeply worrying that as a nation we’re still failing to prepare for our futures, despite the big changes made to pensions in recent years. We have a new government, and with this, the opportunity to ensure the pension reform of the last parliament is implemented successfully. The focus has been primarily on giving those approaching retirement more control of their savings, something that we wholeheartedly support. But it is time for a shift in emphasis from both government and industry. We must now focus on the savers, and do more to help them save for the retirement they want.
“There’s a huge disconnect between the amount people have saved and the retirement income they want in retirement. Most people want an income which would require more than £1m of savings. How close are they to that? With the lifetime allowance due to fall to £1m, unless individuals also have substantial non-pension savings or defined benefit pensions, £42,000 isn’t just unrealistic – it’s more than the Government will allow!
“We now have online tools that could, and should help people to engage in a simple, but effective way. There is a clear appetite for digital and mobile services 61% of people want to manage their pension online, but currently just 23% do so.”