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Pension saving hits new low as 'unrealistic expectations' persist

Fewer than half of us are saving enough to fund our retirement, according to a report from Scottish Widows.


by Michelle McGagh on May 21, 2012 at 11:37

Of those earning £30,000 a year or more, 54% are saving enough for retirement, compared with 40% of people earning £10,000 to £30,000. Where people are earning £50,000 or more a year, 55% are saving enough for retirement.

The report said: ‘Very high earners have generally increased the amounts they save. However, among lower earners there was a fall in average savings, with the ratio [the percentage of income being saved] falling from 8.8% to 8%.

‘Again it looks as though the squeeze on household incomes is having a particular impact on this group.’

Expectations versus reality

To see if people’s retirement expectations are realistic, the report splits people into four groups:

  • Adequate savers: putting 12% of income aside, or expecting main pension income to come from a DB pension;
  • Somewhat under-saving: putting aside 6% to 12%;
  • Seriously under-saving: putting aside up to 6%;
  • Non-savers: saving nothing for retirement.

Savings include employer contributions and non-pension savings intended for retirement but does not include short-term savings or property investment.

Adequate savers

Although the personal income of this group is not necessarily high, with 52% earning under £30,000 a year, the outlook for them is positive. Typically aged 45 or over, they have usually stayed in employment with one company and will benefit from a workplace pension as well as their own provision.

‘Adequate savers understand the value of saving regularly and for the longer term, and they are putting aside significant amounts for retirement on top of their pension savings – £231 a month on average,’ the report said.

This group would be happy with a retirement income of £15,000 to £30,000 a year at age 70 and although most would like to retire at 62, they expect to have to work until 64.

Just 54% of this group believe they are preparing adequately or more than adequately for retirement but the report states 'their expectations on retirement age and income appear realistic, and they can look forward to a relatively comfortable standard of living in retirement’.

Somewhat under-saving

People in this group are typically under 45 and earning less than £30,000 a year, but are juggling a number of financial burdens such as a mortgage and children on top of trying to save for a pension.

Despite just 40% saving with an employer they have relatively high aspirations for their retirement. A total of 29% are looking for a household income of over £30,000 at age 70 and only a third expect to work past age 65.

The report said the outlook for this group ‘could also be considered relatively positive’.

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2 comments so far. Why not have your say?

Rob Walker

May 21, 2012 at 19:42

It looks to me like if we all decided to carry on working the financial services industry would die! I object to all these 'commentators' making those approaching retirement feel somehow inadequate and unhappy if they don't have as much pension as they'd like. After all, most of us go through working life not having as much income as we'd like either!

My tip, move to France, buy a home somewhere cheap that is suitable for your lifestyle (with land, by the sea etc) and have fun. The French health service is OK, good wine at 3 euros a bottle and (mostly) civilised friendly people if you live in a good village.

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Colston Hicks

Jun 17, 2012 at 14:55

Figures from Financial Times Saturday September 30 1978

Gilts 'Over Fifteen Years', very suitable for Final Salary Pension Scheme Funds

Yields AER ranged from 9.70% to 13.05%

Trustees knew what to do for the good of their members.

Invest only in Gilts.

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