Britain could end up in a major pensions crisis by 2028 as Generation X faces reaching retirement age with no savings. That’s the conclusion of a new survey which reckons only one in 10 35-54 year olds have enough savings to give them a comfortable retirement.
The YouGov research published today by Learn to Trade suggests 43% of Brits who are yet to retire are not saving for retirement with women hardest hit. Some 47% of non-retired women are not saving in any way against 39% for men.
“The research reflects current economic uncertainty, with households and individuals losing trust in financial institutions and the Government,” warned Nigel Jump, professor of economic development at Bournemouth University.
He said the financial crisis of 2008 and the subsequent recession, along with a series of regulatory and tax changes to private and public pensions, “have punctured confidence in institutional promises”.
Five years ago this month the government launched its auto-enrolment campaign, forcing firms to enter staff into company pension schemes.
Five years on the government has made auto-enrolment pension schemes compulsory for all UK businesses.
The scheme has been a success. The latest figures from the Association of British Insurers show that work-based pensions hit a record high in 2016, with 7.5 million policies now in force.
But even those now in company schemes face a worrying future, the TUC warned last week.
“It’s great that that automatic-enrolment is giving millions a pension for the first time. But employers simply aren’t contributing enough to schemes,” warned TUC general secretary Frances O’Grady.
She said it means many workers will be short of savings for a decent retirement and warned that if the government doesn’t force companies to raise contributions “people will see their living standards plunge when they reach old age.”
There are also many people excluded from the auto-enrolment scheme because they work for themselves, or earn below the auto-enrolment threshold of £10,000.
“The earnings threshold is a particular issue for those working multiple jobs paying under £10,000, who are eligible for auto-enrolment based on total earnings but don’t get pulled into the system because their income is spread between several part-time roles,” pointed out Ian Browne, pensions expert at Old Mutual Wealth.
Greg Secker, boss at Learn to Trade, which commissioned today’s research said: “We would encourage all Brits – and in particular Gen X – to start future planning as soon as your disposable income allows you to do so.”
How much should I save?
Anything you can put into a pensions pot now will help make your retirement a happier one, but how much should you stash away?
If you’re starting a pension now and hope to maintain your current standard of living when you retire, experts reckon you need to save half your age as a percentage of your income.
That means if you’re 24 now, you’d need to be stashing the equivalent of 12% of your income into a retirement pot.
While that might seem a lot, if there’s a company scheme available, your firm will match or better your pension contributions.
That could mean cut down the amount you need to put in to just 6% of your salary.
To put that in cash terms, if you’re 24 and earn £2,000 a month, you should be thinking about putting £120 into your pension to be on the right track.