More than 30 million people face disappointment when they retire
An estimated 8 out of 10 pension savers do not know whether they will be able to afford a comfortable retirement.
The shocking fact that as many as 30.4 million people of working age across the UK risk not being able to afford to live as they would like, was revealed by the Pensions and Lifetime Savings Association (PLSA).
People indicated that they would save more for retirement if they knew how much cash they would actually need, but uncertainty is holding them back.
As a result of these discoveries, which were made when the PLSA was compiling its Hitting the Target report, the association has set about developing targets for people to aim for so they can be confident of putting enough money aside for their later life.
The retirement income targets will aim to show the lifestyles someone might afford on various levels of income.
The PLSA report is part of the association’s efforts to help people achieve enhanced retirement incomes. It found that 70% of people surveyed believe the retirement income targets would encourage them to increase their savings. This figure jumped to 78% among 18 to 34-year-olds.
Auto-enrolment workplace pensions were introduced by the government in 2012, in a bid to prevent a savings crisis for people in later life. Minimum contribution rates, which are currently 5%, are being increased to 8% next year to persuade people to save more. However, over half the people surveyed wrongly assume these minimum levels are the target for which they should be aiming.
The PLSA says the minimum rate should be boosted to 12% of total salary between 2025 and 2030, with at least 50% being provided by employers to make sure it’s affordable for savers.
Nigel Peaple, the PLSA’s director of policy and research warns that future generations are unlikely to have similar levels of property wealth, or the benefit of final salary pensions, so making sure that people are able to cover costs in later life is essential.
The PLSA surveyed in the region of 1,500 people between 18 and the state pension age (SPA) for their report.
Baroness Altmann, a former pensions minister, said it was very worrying so many people believe the auto-enrolment minimum level is an appropriate amount, and she recommended that people seek help with financial planning. The Baroness pointed out that pension planning is not exact, so pension funds need to be regularly monitored.
A Department for Work and Pensions (DWP) spokesman said people seeking guidance should look to Pension Wise, a free government service, for help.
As the PLSA report underlines, getting your head around pensions can be confusing and scary. You can start with the basics with our helpful guide to which options would suit you best. Our handy guide to the State Pension will also walk you through what you need to know about that.
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