Nearly half (49 per cent) of those who should be saving for retirement are failing to do so adequately, according to Scottish Widows’ seventh annual pensions report.
The research finds one in nine people – 11 per cent – of non-retired respondents indicated they are likely to opt out of Nest if they are automatically enrolled into it.
This is unchanged from last year. The amount they are prepared to contribute has increased and now stands at £37.50 per month, in comparison to £33.90 in 2010. However, this is well below what will be required after the initial phasing-in period. The mean amount was higher for men than women.
Levels of saving remain broadly consistent over five years, pre and post the financial crunch, with those preparing inadequately never falling below 46 percent or rising above 52 percent.
The Scottish Widows Pensions Index – looking at those between 30 years-old and state pension age who earn more than £10,000 per year – shows that only 51 per cent of the current generation of potential savers are making sufficient provisions for their retirement. This drops to around 25 percent when those with a final salary pension are excluded. A fifth – 20 per cent – of people are failing to save anything at all.
This comes despite the fact three quarters of people recognise the need to take personal responsibility for their retirement planning, demonstrating that awareness in the importance of saving is not translating into action. The Scottish Widows Average Savings Ratio – which tracks the percentage of income being saved for retirement by UK workers not expecting to get their main retirement income from a final salary pension – remains at just over 9 per cent. This is a 3 per cent shortfall from the 12 per cent Scottish Widows believe people should be saving to achieve a comfortable retirement
Ian Naismith, head of pensions market development for Scottish Widows, says: “This year’s report clearly illustrates the stark difficulty we face in helping people to recognise the urgent need to take personal responsibility for their future. We need a step-change to overcome this ingrained inertia and help people prepare for their retirement.
“The successful implementation of automatic enrolment, combined with state pension reform, could help galvanise consumers into action to think more about how much they are saving and when they start to make provisions. However, these measures need to be accompanied by a clear message that most people need to see these as the foundation for their retirement savings rather than the full solution.”