Retirement provision ‘insufficient’

June 14, 2011, 11:54 PM GMT+0

Only half of British people who could reasonably be expected to save for their retirement are saving enough, our survey for the 2011 Scottish Widows UK Pensions report has found. This is up from 48% in 2010, but below the 54% who were doing so in 2009. One in five is doing nothing at all for their retirement.

Despite such low figures, the report identified that women are catching up with their male counterparts in terms of saving for retirement, with the gender gap having fallen to the lowest ever at just 3% (men 53% preparing adequately, women 50%).

  • Only 51% of British people who could reasonably be expected to be saving for retirement are saving enough money, according to the Scottish Widows UK pensions report
  • Within this, 53% of males and 50% of females are adequately preparing
  • However, with average female income significantly lower than male, this still leaves women with much lower prospective retirement income in monetary terms, while 23% of women are saving nothing, compared with 17% of men
  • 20% of people are saving nothing in 2011, compared with 21% in 2010
  • There is a significant savings age gap, with 59% of over-50s preparing adequately for their retirement, compared with 47% of those between 30 and 50
  • The income group which currently appears to be preparing best for retirement is those earning between £30,000 and £50,000. High-income groups (above £50,000) do not seem as focused on retirement preparation as others
  • Adequate savers are typically male, married and in the latter part of their career. Many are relatively modest earners, and may have significant personal savings
  • The group most guilty of seriously under saving is largely made up of people in their 40s (40%), and has the highest average income of all the groups at £35,900 a year
  • Non-savers are the most likely to have a relatively low income, may be renting their home, be single, and probably change jobs quite frequently

The impact of ‘NEST’

The implementation of automatic enrolment from October 2012 will change the pensions landscape in the UK dramatically, and the National Employment Savings Trust (NEST) will provide an automatic alternative to existing pension arrangements.

Our poll found that if employees were automatically enrolled in NEST, a low cost pensions scheme which gives workers a single retirement pot they can keep contributing to if they change employer or stop working, only 11% would opt out, although 21% remain undecided. However, NEST will only provide an income of around £7,300 a year, or £140 a week, and Scottish Widows emphasises that consumers ‘must understand’ what effect the state pension changes will have on their future incomes, recommending changes in the ways that pension companies communicate with potential customers.

The Scottish Widows Pensions Index, which has increased from 48% to 51% this year, focuses on those who could reasonably be expected to save for their retirement. It excludes those under 30 as they are likely to have other financial priorities, and those earning under £10,000. Everyone else under 60 for women, and 65 for men, is included.