11.9 million failing to save enough for retirement

Nick Elvin

A new Department for Work and Pensions (DWP) report shows that 11.9 million people of working age in the UK are failing to save enough to ensure they can maintain their standard of living into old age.

However, many of them could safeguard their financial future by putting away just a little more, because out of that 11.9 million, almost half are at least 80% of the way towards achieving their retirement income target, while only eight per cent are less than half way there. 

Pensions Minister Steve Webb said: “While the state will always provide a decent safety net so people can get by, anyone wanting to see their standard of living maintained into old age needs to make their own provision too.

“This new research shows that by saving just a little more, a huge number of working people could make their future retirement so much more comfortable.”

The research found that reforms of the state pension system (including automatic enrolment) and efforts to help older job seekers get back into employment are all playing a role in tackling the problem of under-saving. While this problem exists among all income groups, it is people in the middle and higher income ranges who, according to the DWP, now face the biggest income hit when they give up work.

Commenting on the research, Malcolm McLean, senior consultant at independent firm of actuaries and consultants, Barnett Waddingham said: “The report underlines the important role auto-enrolment has played and will continue to play in encouraging pension saving but appears to recognise that the minimum specified contribution levels (8% of attributable earnings) are inadequate.

“The first ‘end products’ from auto-enrolment saving will soon start to materialise and are likely to disappoint many enrollees who might have been expecting more from their pension plan, however unreasonably given the low level of contribution they had made. This could lead to a wider disillusionment with the system as a whole.

“In the circumstances an early increase to say 11% (6% employee, 4% employer, 1% tax relief) of attributable earnings might be more appropriate and would help to secure better outcomes for millions more in the future.”