Just 7 percent of people in the UK are on track for the retirement they aspire to, exactly the same percentage as in Aril 2014, according to a new report from Aegon.
Aegon’s third UK Readiness Report, the latest in a series of reports which look at attitudes towards retirement, has a particular focus on levels of engagement with workplace pensions. The latest report has found that peoples readiness score has actually fallen over the past 12 months, from 52 to 47.
People want to retire at 63 and this fallen is caused by people’s expectations about the amount of money they hope to retire on each rising from £35,000 to £42,000. This would require a savings pot of more than £1m, which is a sum higher than the new pension lifetime allowance.
More than five million people have now been auto-enrolled into a pension scheme by their employer in an attempt to improve retirement readiness.
Despite this, 41 percent of employees don’t know how much of their salary is being contributed to their pension pot, and 59 percent say they have no idea how much their employer is contributing. A staggering 50 percent of all UK workers say they have no idea how much they have already saved in their company pension so far. 35 percent are also unaware if they are even eligible for auto-enrolment into a company pension.
Half of all respondents have done nothing to review their retirement plans, 55 percent have never checked the performance of their retirement savings. It may not come as a surprise then that 38 percent do not feel confident about being able to retire at their target age.
However, there are positive attitudes towards workplace pensions and saving for the future. 79 percent plan to retire on their company pension plan as their main source of post-retirement income and only 6 percent said they would leave the auto-enrolment scheme when the minimum contributions rise to 5 percent in 2018.
David Beattie, Managing Director, Aegon UK Direct says:
“It is deeply worrying that as a nation we’re still failing to prepare for our futures, despite the big changes made to pensions in recent years. We have a new government, and with this, the opportunity to ensure the pension reform of the last parliament is implemented successfully. The focus has been primarily on giving those approaching retirement more control of their savings, something that we wholeheartedly support. But it is time for a shift in emphasis from both government and industry. We must now focus on the savers, and do more to help them save for the retirement they want.
“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!
“We now have online tools that could, and should help people to engage in a simple, but effective way. There is a clear appetite for digital and mobile services; 61% of people want to manage their pension online, but currently just 23% do so.”