We all need to start doing more to prepare for retirement, and while auto-enrolment is going a long way to helping that, there's plenty of work still to do. This is sharply highlighted by the finding that around one in seven people are approaching retirement with no workplace or private pension whatsoever, which means a worrying number could be wholly reliant on the state.
That's according to research from Aegon, with its figures revealing that the issue is even more pronounced among women: 20% of women aged 55-65 have no savings for retirement, compared with 12% of men, highlighting the ongoing gender gap when it comes to retirement saving. The report further reveals that the number of people without a pension drops dramatically as they enter the workplace, demonstrating the effect of auto-enrolment, yet uptake then plateaus until retirement age.
Indeed, 41% of those aged 18-24 don't have a pension, which falls to 16% among those aged 25-34, presumably as growing numbers enter full-time employment. However, the proportion then remains at an average of 16% until 65, with those individuals never tempted to begin retirement saving, despite growing calls for them to do so.
Unfortunately, if they don't have any other savings, this means a lot of people could be struggling when they hit retirement, with the state pension being woefully insufficient for most. Even those entitled to the full single tier state pension will receive an income of just £8,297 a year, and it generally won't be possible to inherit a partner's pension, either.
This in itself highlights the need for more to be done to encourage pension saving, as many could otherwise find themselves in pensioner poverty.
Kate Smith, head of Pensions at Aegon, said that auto-enrolment "has undoubtedly been a success", but cautions that "there is a portion of the population who either feel unable to or are unwilling to save for retirement".
This may include those who are self-employed or in the 'gig' economy, Kate explains, as well as employees who simply don't meet the criteria for auto-enrolment. Others may consciously opt out of a workplace pension, perhaps due to affordability reasons, or simply because they don't recognise the benefits of pensions over other forms of saving.
"There's also likely to be a portion of people who prioritise a house purchase above other long term saving. The size of deposits required now can mean it takes longer to get on the property ladder, which will have a knock-on effect on freeing up cash to save in a pension.
"Our findings show how critical it is that the review of automatic enrolment brings more people into its scope, and that we find equivalent nudges to help the self-employed and gig economy workers save for pensions as the default."
It needn't take much to be prepared, either. As Kate points out, even saving a modest amount can soon add up, with any contribution costing much less than its face value. Indeed, those who save into a pension can benefit from tax relief: a £100 contribution will only cost a basic rate taxpayer £80 in take-home pay, as the Government tops it up by £20. Then there's employer contributions, which add further benefit, all of which make "pension saving more affordable that you think".
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