New data has revealed that nine in ten workers are saving less than needed for a comfortable retirement, reported by The Times.
The report revealed that “workers, bosses and government may all have to contribute more to avoid an issue that has been put on the backburner by ministers”.
Recent figures have also disclosed that 38% of working age people (equivalent to 12.5 million) are undersaving for retirement when measured against TRRs Before Housing Costs (BHC).
This may also be due to rising house prices and higher interest rates as recent research suggests that these higher interest rates mean that younger buy-to-let investors will not replace older landlords.
Government data from last year stated that nearly one in four (24%) of 40-75 year olds did not have a private pension and 16% had not yet started saving for retirement. Those that had started saving did not always know if what they had saved would give them the income they would need income in retirement. Only 23% of people not yet retired said they had a very good idea of the income they would need in retirement
Paul Johnson, head of the Institute for Fiscal Studies, told The Times that “very few people feel that now is the moment to put lots more in as we face the cost of living squeeze”.
In February this year, a shake-up of private pensions was announced by the Department for Work and Pensions aiming to create “fairer, more predictable, and better-run pensions”. The government said this will “help address the pension inequality gap”.
“The last decade or so has seen state and private pensions deliver much better outcomes for many pensioners. But there is a risk this has bred complacency among policymakers.
Most private sector workers are left having to manage considerable risks — not least over how long their retirement will be — which for many will be incredibly difficult to balance well.”
Lord Turner’s commission suggested that people would need to save about 15% of their income to have a retirement income of about two thirds of their salary, said The Times.
“Automatic enrolment has brought millions into workplace pensions, but all too often at much lower rates of saving than the pensions commission thought would be needed.”
In the same article, Sir Steve Webb, partner at LCP and pensions minister in the coalition government, said:
“There’s always a challenge to government in increasing pension contributions because this lowers people’s take-home pay. It is understandable that during a ‘cost of living crisis’ they have been reluctant to do that. But if savers can’t be asked to pay more, firms can’t be asked to pay more and the government won’t pay more, then it’s not clear where extra money will come from.”