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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
‘They are making some effort to prepare for their retirement, while also recognising the need to do more,’ it said.
‘Most still have time to increase their savings to a more adequate level. However, with few having access to DB provision the future for them is relatively uncertain, and they need to have confidence in the financial system.’
The people in this group are ‘sleepwalking into retirement’ despite 51% taking home salaries of over £30,000 and 3% taking home an income of over £100,000.
Typically aged under 45, this group has a high number of self-employed people. Many have started pensions with an employer in the past but 23% are no longer contributing, and many are saving intermittently rather than regularly.
The group has similar retirement aspirations as those in the ‘somewhat under-saving’ bracket but 24% expect to work to 70 and beyond, although the same number expect to retire before 65.
One in five expect their retirement income to match their final earning, which the report said was unrealistic ‘unless they increase their savings dramatically’.
‘Many in this group appear to be sleepwalking towards retirement. With some evidence of an attitude of living for today, they are making only a token effort to save for retirement,’ the report said.
‘Their aspirations are relatively high, but there appears to be little evidence of taking action to achieve these aspirations. This group needs a serious wake-up call.’
People in this group have lower average earnings than the other groups, with 49% earning under £20,000 a year. Although typically younger, 26% of the group are in their 50s.
These people have less job security and are more likely to be on temporary contracts and 47% have no pension provision at all, with 80% saying the reason for this is they have no spare money.
Their retirement expectations are more modest, with half saying they would be relatively comfortable on £20,000 a year and 23% expect to work beyond 70 and 32% do not know when they will be able to retire.
The majority, 84%, of this group understands that they need to do more to secure their retirement.
The report said: ‘While the current position is very poor, this group at least recognises that it is not doing enough and that this will have serious consequences in retirement.’
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