We all know the importance of saving adequately for retirement, as that's the only way to ensure a comfortable standard of living throughout your golden years. Happily, that message seems to be getting out there, with research from Scottish Widows revealing that more and more people are becoming suitably prepared.
In fact, the proportion of people saving adequately for retirement is at its highest level since 2009, with 53% of respondents being suitably prepared. Not only that, but it's a massive jump from last year when just 45% of people were saving enough, and that makes it the biggest year-on-year increase ever recorded by the Retirement Report.
The monthly amount people are saving towards retirement outside their pension has increased too, and now stands at an average of £130 per month. This is a significant 141% increase from 2006 when just £54 was saved per month, while the total amount people have in savings and investments – an average of £40,000 per person – is at its highest ever level.
So, just why the increase in saving? Well, it looks like auto-enrolment has had a clear impact. The format means everyone will be automatically enrolled into a workplace pension, and that's not only encouraged more people to save for their future but has ramped up the amount of contributions made too – the average proportion of earnings put aside has increased from 9.7% to 11.6%, already well above the long-term minimum requirement of 8% and showing that people are increasingly realising the importance of saving for the long-term.
Then there's the fact that people are simply more confident in their financial state, as well as the economy as a whole. Some 37% of respondents now feel optimistic about their long-term finances – compared to 32% a year ago – while the number of people free from debt has increased too, rising to 16% from the 14% recorded in 2013.
Not only that, but the proportion of people who cite affordability as a reason why they don't plan to save more over the next 12 months has fallen to 59%, a welcome drop from the 68% who gave this as a reason a year ago. All in all, the future is looking bright for workers, and this financial feel good factor is translating into better savings habits.
Ian Naismith, pensions expert at Scottish Widows, commented: "It is heartening to see that finally people are starting to sit up and take notice of the importance of planning for the future – whether this be through proactively upping their contributions due to a more favourable economic climate, or starting to make plans for their retirement for the first time thanks to auto-enrolment."
However, despite such positivity, there's still work to be done to make sure everyone can have a comfortable future. The research also found that 33% of respondents have no idea of the extent to which their savings will meet their retirement needs – highlighting the need for increased pro-activity and communication between provider and saver – while a third (32%) don't think they'll be any better prepared for their retirement than their parents were.
"Although we have undoubtedly made some significant strides forward, there are still some groups who are not preparing adequately for a comfortable later life and are at risk of slipping through the net," added Mr Naismith. "While celebrating the success of the wider savings picture, we must not forget to identify and support these at-risk groups, such as the self-employed or part time workers, to make sure they too have a plan for securing their financial future and do not get left behind."
There are bound to be some groups who can't benefit from the likes of auto-enrolment or who might not have considered setting up a personal pension, and that's when having your own savings plan becomes even more important. Even those with a workplace pension could benefit from having additional retirement savings pots, so make sure to consider having extra accounts – and always maximise your tax-efficiency with an ISA – and that way everyone can be prepared.
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