Workplace Pensions and the retirement gap
According to a Press Release from the Pensions and Lifetime Savings Association (PLSA), a survey they conducted has found that 26% of those with a workplace pension believe that their current amount of pension saving will not be enough to sustain them when they retire.
The research revealed that, out of the age groups surveyed, those aged between 35 and 54 were most concerned that they wouldn’t have enough to live off (29%). 31% of women reported their concerns to the PLSA, compared to 21% of men.
This belief is supported by data collected by the Office of National Statistics (ONS) as part of their 2021 Annual Survey of Hours and Earnings.
Since the auto enrolment reforms were introduced in 2012, the proportion of private sector workers saving in a workplace pension scheme has more than doubled from 32% to 75%.
The minimum auto enrolment contributions are unlikely to provide a significant sum at retirement. This means that for the millions of employees auto enrolment will deliver disappointing retirement. For example:
- A 30-year-old earning £30,000 a year could end up with a fund worth around £306,000 at 68 (their state pension age) if they contribute 8% of their salary into a pension each year.
- This could deliver pre-tax income in drawdown worth £10,000 a year until age 97, along with £76,500 tax-free cash.
- A 40-year-old earning £30,000 a year could end up with a fund worth £168,000 at 68 if they contribute 8% of salary per year.
- This could deliver a pre-tax income in drawdown worth just £5,500 a year until age 97, along with £42,000 tax-free cash.
For more information about saving for retirement, click here to read our article ‘when can I retire?’ , or take a look at our retirement calculator to get an estimate of how long your non-property wealth is likely to last.
The information in this article is correct as of 21/05/2022.
Please note: Investment returns are not guaranteed, and you may get back less than you originally invested. Some Auto-Enrolment scheme advice is not regulated by the Financial Conduct Authority.