“New Report Shows Rising Number of Britons Not Saving Enough for Retirement
A report released today by Scottish Widows, a life insurance company, reveals that the percentage of Britons not on track to achieve a minimum retirement lifestyle has increased from 35% to 38% in the past year. This equates to 1.2 million additional people falling into this category.
The Pensions and Lifetime Savings Association (PLSA) defines a minimum retirement lifestyle as covering all the necessary expenses of a retired individual, with some extra funds for leisure activities such as a holiday, dining out, and affordable leisure activities. According to the PLSA, the cost of such a lifestyle is estimated to be £14,400 for a single retiree or £22,400 for a retired couple.
The report, based on interviews with 5,072 people saving for retirement in March and April, represents a significant portion of the UK population. It reveals that while most people would like to retire at the age of 62, over half (54%) believe they will have to work longer, on average by seven years. Additionally, 27% of those surveyed feel they will never be able to retire.
The report also highlights the dependence of retirees on the state pension. Over half of those questioned (54%) expect the state pension to make up a meaningful portion of their retirement income, with three-quarters considering it hugely important for covering everyday expenses. However, 12% are worried that the state pension may not be available to them by the time they retire, possibly due to the rising state pension age, which is set to increase to 67 between May 2026 and the end of 2028.
The increase in the number of Britons not saving enough for retirement is attributed to the growing struggle to save more amidst rising costs. The report found that 42% of future retirees feel they can save for retirement after covering their daily expenses, mainly due to higher rent and mortgage payments.
This report raises concerns about a potential retirement crisis in the UK. While the introduction of auto-enrolment in 2012, a policy implemented by the coalition government, was successful in getting more people into a workplace pension, the contributions are not considered sufficient. Currently, the minimum contribution stands at 8% of a worker’s salary, with employers contributing at least 3% and employees 5%. However, the PLSA suggests that this should be increased to 12%, split equally between employers and employees. Unfortunately, the new government’s Pensions Bill, published in last week’s King’s Speech, did not include this measure.
The report also mentions other factors contributing to the shortfall in retirement savings, such as Gordon Brown’s tax raid on pensions in 1997 and the impact of people living longer. David Fairs, a partner at pension consultants LCP, emphasizes the need for the retirement system to adapt to the modern world, where people change jobs, move between full-time and part-time work, and have different marital statuses. He believes that there is still time for most workers to plan ahead and save more, particularly for younger workers.
In a positive step, the government has recently announced changes to the law, which will increase the amount that employers must contribute to their workers’ pensions and lower the age of automatic enrolment from 22 to 18. The new government has also promised that the Pensions Bill will raise the average saver’s pot by 9%, equivalent to £11,000, over the course of their career.
While these efforts are a step in the right direction, it is essential to increase the amount saved by all individuals for their retirement. As we adapt to the changing world, it is crucial to ensure that the retirement system also evolves to meet the needs of retirees.”
