A leading think tank has urged the Government to enforce pension saving or risk millions of people suffering poverty in retirement, with the Policy Exchange warning that a pensions time bomb could be on the way.
The report found that some 11 million people face entering "pensions poverty", with average earners needing to save over six times more than they currently do if they're to generate a decent retirement income.
The Government's recommended income to enjoy a comfortable retirement is £16,200, meaning a pension pot of £240,000 would be required. However, currently a worker on an average wage (£27,000) amasses a pension pot of just £36,000 – enough for a retirement income of a meagre £1,340 per year.
The report stated that the only way to avoid millions being left in poverty is to make pension saving compulsory, and that while they support the auto-enrolment initiative they've warned that even making contributions of 8% won't be enough.
Instead, they recommend adopting the Help to Save scheme, whereby the opt-out clause would be removed from auto-enrolment (unless an individual could demonstrate they already held sufficient funds) and individual contributions would be increased as a worker's income rises, ideally reaching a 12% contribution rate over the next five years, as well as recommending a shake-up of the annuity system.
James Barty, consultant to the Policy Exchange and author of the report, said that the lack of people saving for retirement was putting an "intolerable burden on the state" which needed to be addressed.
"With an ageing population, putting money aside for later life should be seen in the same context as national insurance contributions, taxes and even education - an obligation that falls on everyone in society. Help to Save will prevent the state from having to pick up the tab for people who haven't put aside enough money for later life," he said.
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