18th May 2015
Only a mere 7% of the UK population is on track for the retirement they aspire to according to research from Aegon.
No progress has actually been made in the past year as this part of the insurer’s annual survey, exactly mirrors last year’s result.
But Aegon’s third UK Readiness Report – the latest in a series of reports that looks at attitudes towards retirement found that the nation’s readiness score has actually fallen over 12 months from 52 to 47.
People want to retire at age 63 and this fall is due to people’s expectations about the amount of money they hope to retire on each year rising from £35,000 to £42,000 – despite the fact that this would require a saving pot of more than £1m, a sum higher than the new pension lifetime allowance, which is due to fall to £1m in 2016.
More than five million people have now been auto-enrolled into a workplace pension scheme by their employer in an attempt to improve retirement readiness.
However, 41% of employees don’t know how much of their salary they’re contributing to their pension pot, and 59% say they have no idea how much their employer is contributing. On top of this, half of the UK’s workers have no idea how much they have saved into their company pension so far. 35% of those in employment don’t even know whether they’re eligible to be auto-enrolled into a company pension.
In fact half of all respondents have never done anything to review their retirement plans, and 55% have never checked the performance of their retirement savings. It is therefore perhaps no surprise that less than two in five, at 38%, feel confident about being able to retire at their target retirement age.
There is however positive sentiment about the idea of having a workplace pension and the desire to save for the future. The analysis found some 79% plan to rely on their workplace pension as their main source of post-retirement income, and just 6% said they would leave the auto-enrolment scheme when the minimum contributions rise to 5% in 2018. In fact one fifth said they would go so far as to increase the amount they saved beyond the minimum requirement.
David Beattie, managing director, Aegon UK Direct described the results as “deeply worrying” given that Britons are still failing to prepare for their future, despite the big changes made to pensions in recent years.
He said: “There’s a huge disconnect between the amount people have saved and the retirement income they want in retirement. Most people want an income which would require more than £1m of savings. How close are they to that? With the lifetime allowance due to fall to £1m, unless individuals also have substantial non-pension savings or defined benefit pensions, £42,000 isn’t just unrealistic – it’s more than the Government will allow.”