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One in five putting nothing aside for retirement

One in five putting nothing aside for retirement

Category: Retirement

Updated: 21/05/2012
First Published: 21/05/2012

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The UK could be facing an impending retirement crisis, as many are not saving enough for their time after work, while others are putting nothing aside at all.

New figures from Scottish Widows have revealed worrying new developments in UK pensions, with savings falling to an all-time low.

In fact, less than half of people are saving enough for their retirement, down 5% from last year and 8% from 2009.

As well as identifying record lows in pension savings, the new figures lay bare the stark differences in current expectations and reality.

Despite retirement savings plummeting, the nation's aspirations for their pension income have actually increased by £200 from 2011 to 2012.

The findings show that the average level of annual income people would feel comfortable living on at 70 years old is now £24,500 compared to £24,300 in 2011.

However, the total pot for an average saver – based on somebody aged between 30 and 65, saving almost 9% of their £25,000 salary – is around £150,000 in today's terms which would only provide an annual pension of £5,700.

With the addition of the state pension this would generate a yearly income of approximately £13,000 which falls drastically short of the £24,500 annual income people are looking for and equates to a total shortfall of £300,000.

To meet current expectations, an average saver needs to save an additional £4,500 a year or £375 per month to plug this expectation gap.

"These are alarming findings as UK pension provision has hit an all time low," said Ian Naismith, head of pensions market development for Scottish Widows.

"People are saving less for old age yet their expectations remain high as the majority fail to recognise the harsh reality of retirement.

"With an aging population, and ongoing economic difficulties, it has never been clearer that we need to do more to shift people quickly from their unrealistic 'rose-tinted' expectations of retirement.

"They must either increase their savings substantially or change their expectations of when they might retire and how much income they will receive."

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