Over a quarter of people on pension schemes haven’t paid into their fund every year, new research from YouGov SixthSense reveals.
The “Pensions and Investments 2013: Retirement Planning and Gender” report shows that 27% of those paying into pensions have not contributed to their fund every year, with non-payment primarily because of insufficient income from work (30%), or unemployment and illness (19%).
The YouGov research indicates that even those making regular payments into their pension schemes are unlikely to have enough for a comfortable retirement. Over half (54%) of people paying into pensions have less than £50,000 in alternative savings and investments. Approaching one in three pension contributors either have no additional funds or less than £10,000, with 11% having no other savings or investments and a further 22% having under £10,000.
People plan to adopt a number of measures to cope with a financial shortfall in their old age. More than six in ten (61%) unretired people say that they will carry on working if they do not have enough money to live on when they are due to retire. 40% plan to move to a cheaper home and just over three in ten (31%) say they will rely on state benefits. One person in eight (12%) doesn’t know.
The YouGov SixthSense research shows that the paucity of people’s pension provision in the UK is driven by a lack of knowledge about the level of funds they will need to retire. Although the size of the retirement fund needed depends on lifestyle as well as other factors, Which? suggests retirees need a pension pot of up to £300,000. However, one in eight (12%) of pension contributors believe they only need to have a pension pot of £100,000 or less in order to have a financially comfortable retirement, while one in nine (11%) said £600,000 and over.
Furthermore, when asked how much money a healthy person of 65 would need to buy a level annuity of £10,000 a year, 20% of pension contributors gave answers in the correct range, approximately £180,000 to £200,000. Four in ten (40%) said they did not know, and 9% did not know what an annuity was.
James McCoy, YouGov Reports Research Director, says: “The phrase ‘pensions timebomb’ has been bandied about a lot in recent years, but these findings show the severity of the situation facing the UK over the next few decades. Of course, the challenging economic climate facing people right now is at the forefront of most people’s minds. However, the public’s attitude at present is shaped by a lack of forward thinking and knowledge that may have dire consequences as the post-baby boomer generation reach retirement age.
“At the moment, a large swathe of the public holds on to a belief that everything will be ok in the end and that they will either carry on working or will move into smaller or cheaper homes. However, this presupposes that people will be healthy, that there will be enough jobs to go round and that they will make enough money through property to survive. This is making a lot of assumptions, many of which could prove to be false.”
