Workplace pension provision will play a key role in closing Britain’s chronic savings gap according to research by the Association of British Insurers (ABI).
Time to act: Tackling our savings problem and building our future showed that increasing an annual pension contribution from 8% to 12% can increase a pension pot by 50%, while delaying starting pension saving by five years can reduce a final pension pot by 17%.
The findings also showed that more than two-thirds of people recognise that the level of their contributions has the biggest impact on the size of their pension.
Of the 2,177 non-retired adults surveyed, one in four people would be prepared to work beyond their planned retirement date to help ensure sufficient retirement income. One in five would be willing to downsize to a smaller property to release money to pay for their retirement.
More than half (53%) are not confident that they will have sufficient income in retirement to maintain their standard of living in retirement, and three in four in this group of respondents recognise that the state pension alone is not enough to ensure an adequate standard of living.
According to the ABI, more needs to be done to utilise the workplace to encourage greater saving, such as introducing options, like the United States of America’s ‘save more tomorrow’, which sees employees commit to future increases in pension contributions.
Steve Gay, the ABI’s director of life, savings and pensions, said: “Auto-enrolment should be a watershed moment in tackling Britain’s savings gap. One in two people are not saving enough for their retirement, and many are not saving at all. Too many people are caught between a rock and a hard place: rising life expectancy makes the need to save for the future more important than ever; yet the tough economic times are understandably putting the squeeze on family budgets.
“Auto-enrolment will bring at least seven million people into the savings habit. As we know that people are more likely to save through their payslip, we must look at how more can be done in the workplace to help people adequately save for their retirement.”
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