UK Pension Savings Hit Record Low
UK pension savings have hit an all-time low according to the eighth annual Scottish Widows Pensions Report 2012 with only 46% of people saving enough for their retirement - five percentage points down on last year and a fall of eight percentage points from 2009.
The drop in pension provision is widespread across age groups and income levels according to the 5200 UK adults questioned.
Worryingly, one in five (22%) have put nothing aside for later life. This figure has also increased year-on-year.
Scotland is one of only two UK areas where more than half (56%) are saving adequately for retirement. The other area is Yorkshire & the Humber (54%). This could be down to the high number of Scots who are employed by large public and private sector organisations.
As well as identifying record lows in pension savings, the new report lays bare the stark differences in current expectations and reality.
Despite retirement savings plummeting, the nation's aspirations for their pension income have actually increased by 200 from 2011 to 2012. The findings show that the average level of annual income people would feel comfortable living on at 70 years-old is now 24,500 compared to 24,300 in 2011.
Based on this year's new low average savings levels, an average saver retiring at 65 would receive just over half the amount that they feel they need.
The total pot for an average saver is around 150,000 in today's terms which would only provide an annual pension of 5700.
With the addition of the state pension this would generate a yearly income of approximately 13,000 which falls drastically short of the 24,500 annual income people are looking for and equates to a total shortfall of 300,000.
To meet current expectations, an average saver needs to save an additional 4500 a year or 375 per month to plug this expectation gap.
Furthermore, high retirement income expectations are matched with a desire to retire before the official state pension age. As many as 41% of people would like to retire by their 60th birthday, the average age at which people would like to retire remains 61-62 and under one in ten, just 9%, want to work until they are 70. This has remained consistent from 2008 - 2012.
Ian Naismith, Head of Pensions Market Development for Scottish Widows, said: "These are alarming findings as UK pension provision has hit an all-time low.
"People are saving less for old age yet their expectations remain high as the majority fail to recognise the harsh reality of retirement. With an aging population, and ongoing economic difficulties, it has never been clearer that we need to do more to shift people quickly from their unrealistic €rose-tinted' expectations of retirement.
"They must either increase their savings substantially or change their expectations of when they might retire and how much income they will receive.
"Auto Enrolment presents a once in a lifetime opportunity to reverse these trends. But for this to be successful we need a compelling Government communications campaign to make clear in simple and understandable terms the need to save for retirement."
The Scottish Widows Pensions Index - looking at those between 30 years-old and state pension age who earn more than 10,000 per year - reveals that over a fifth (22%) of people are failing to save anything at all which is a two percentage point increase on last year.
Naismith said: "People failing to make any kind of provision for their later years are in a particularly precarious position. Some may think that they will be able to fall back on the state pension, property or a partner's pension and whilst these options may provide some level of support, saving nothing for retirement could be a fast track to financial problems and serve poverty in later life."
The drop in pension provision is widespread across age groups and income levels according to the 5200 UK adults questioned.
Worryingly, one in five (22%) have put nothing aside for later life. This figure has also increased year-on-year.
Scotland is one of only two UK areas where more than half (56%) are saving adequately for retirement. The other area is Yorkshire & the Humber (54%). This could be down to the high number of Scots who are employed by large public and private sector organisations.
As well as identifying record lows in pension savings, the new report lays bare the stark differences in current expectations and reality.
Despite retirement savings plummeting, the nation's aspirations for their pension income have actually increased by 200 from 2011 to 2012. The findings show that the average level of annual income people would feel comfortable living on at 70 years-old is now 24,500 compared to 24,300 in 2011.
Based on this year's new low average savings levels, an average saver retiring at 65 would receive just over half the amount that they feel they need.
The total pot for an average saver is around 150,000 in today's terms which would only provide an annual pension of 5700.
With the addition of the state pension this would generate a yearly income of approximately 13,000 which falls drastically short of the 24,500 annual income people are looking for and equates to a total shortfall of 300,000.
To meet current expectations, an average saver needs to save an additional 4500 a year or 375 per month to plug this expectation gap.
Furthermore, high retirement income expectations are matched with a desire to retire before the official state pension age. As many as 41% of people would like to retire by their 60th birthday, the average age at which people would like to retire remains 61-62 and under one in ten, just 9%, want to work until they are 70. This has remained consistent from 2008 - 2012.
Ian Naismith, Head of Pensions Market Development for Scottish Widows, said: "These are alarming findings as UK pension provision has hit an all-time low.
"People are saving less for old age yet their expectations remain high as the majority fail to recognise the harsh reality of retirement. With an aging population, and ongoing economic difficulties, it has never been clearer that we need to do more to shift people quickly from their unrealistic €rose-tinted' expectations of retirement.
"They must either increase their savings substantially or change their expectations of when they might retire and how much income they will receive.
"Auto Enrolment presents a once in a lifetime opportunity to reverse these trends. But for this to be successful we need a compelling Government communications campaign to make clear in simple and understandable terms the need to save for retirement."
The Scottish Widows Pensions Index - looking at those between 30 years-old and state pension age who earn more than 10,000 per year - reveals that over a fifth (22%) of people are failing to save anything at all which is a two percentage point increase on last year.
Naismith said: "People failing to make any kind of provision for their later years are in a particularly precarious position. Some may think that they will be able to fall back on the state pension, property or a partner's pension and whilst these options may provide some level of support, saving nothing for retirement could be a fast track to financial problems and serve poverty in later life."
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