A fifth (20%) of UK employees are not saving anything towards their retirement, according to research by Scottish Widows.
The 11th annual Scottish Widows Retirement report, based on responses from 5,191 UK adults, also found that retirement savings have reached a record high, with 56% of respondents now saving adequately.
The average proportion of earnings being put towards retirement each month now stands at 12%, up from 6% on 2006 and 9% in 2013.
The study also found:
- Aside from pension savings, respondents are saving an average of £142 a month towards their retirement, an increase of 8% from last year’s figure of £130.
- 19% expect to save more in the next 12 months.
- 40% feel positive about their long-term financial situation, compared to 37% that said the same last year.
- 43% of respondents with an annual income of under £10,000 fail to save anything towards their retirement, compared to around a quarter (24%) of respondents earning £30,000, and 9% of respondents that earn more than £30,000 a year.
Ian Naismith, senior manager in retirement income and planning at Scottish Widows, said: “Since we began our research over a decade ago, a record proportion of people are now saving adequately for the future, showing that the unprecedented changes in the pensions industry have gone some way to engage the nation with retirement saving.
“Despite the positive signs, causes for concern remain, [because] savings levels among the self-employed and those working for small employers declined this year. The final years of rolling out automatic-enrolment will be crucial [because] it reaches those who have previously not had the opportunity to participate in a workplace pension.
“Our research shows that confusion remains around how actions today translate into money tomorrow, with many people retaining unrealistic expectations about what their income in retirement might be. Both the industry and the government need to continue working together to help people understand the living standard their savings might produce in real and tangible terms.
“Having a plan in place, starting to save earlier and putting aside more for later life will mean people will be better prepared to close the retirement aspiration gap.”
It’s reassuring to hear that half of over 30s are saving over 10% into their pension, but it’s important we also look at the bigger picture and consider younger savers and those who have catching up to do.
Overall, just 7% of the UK population are currently on track for the retirement they want, largely because people start saving too late.
There is a clear lack of engagement within the younger population – 63% of under 35s admit to having never checked their pension savings and 37% have no idea what they’re paying. So it’s no surprise that two in three don’t feel confident about being able to retire when they want to.
People need to be saving at a younger age if we are to properly equip the UK for the future.