A Government report has revealed that 15 million Britons are not saving enough for retirement and more than four in 10 working adults are not putting aside anything at all. Low and middle earners, the self-employed and women are most at risk of hitting a 'severe cliff-edge' in their income when they retire, it warns.
Fifteen million Britons are not saving enough for retirement and more than four in 10 working adults are not putting aside anything at all, a Government report has warned.
Low and middle earners, the self‑employed and women are most at risk of hitting a 'severe cliff-edge' in their income when they retire, it says. The report was published by the Pensions Commission, an official initiative set up last year by the Government to try to stop future retirees ending up poorer than older people today. It addresses the extent of the problem in its publication today, and its recommendations will follow in a final report next year.
The Commission found around half of low and middle earners are only saving at minimum automatic enrolment levels, with little else to fall back on. And it says where employers are contributing to their workers' pensions at around the statutory minimum rate, this is largely benefiting higher earners.
New Pensions Commission: Its predecessor's landmark report issued in 2006 laid the groundwork for auto enrolment At present, people auto enrolled into work pensions save at minimum 8 per cent of a certain portion of their salary - their total earnings between £6,240 and £50,270 a year before tax. Workers put in 4 per cent, employers 3 per cent, and the Government 1 per cent via tax relief.
However, many employers are more generous and pay in above the 3 per cent minimum, especially if you voluntarily increase your own contributions. Many pension industry experts have called for the standard contribution to be raised to 12 per cent of salary.
However, it is up for debate how much extra individuals would be expected to put in, and whether employers would be compelled to increase their contribution too. Read More Asking people to save 12% of salary into pensions could tackle looming retirement poverty crisis The Government has said it will not make any changes to automatic enrolment contribution levels in the current Parliament, so any decision has to wait until after the next election, due in 2029 at the latest.
The Commission made the following findings. - Fifteen million people are under-saving for retirement and this could rise to 19 million unless action is taken. - Some 45 per cent of working-age adults, or around 18 million people, are not saving into a pension at all, despite nearly half of them being in work.
- Around 3 in 10 private pension pots are accessed at the earliest possible opportunity - currently age 55, rising to 57 in April 2028 - with half of all pots taken out in full. - Nearly half of pots accessed at this point are spent on big-ticket items like a car, holiday or home renovations. - Only 4 per cent wholly self-employed workers are saving for retirement, and younger self-employed people are even less likely to do so.
Two decades ago, the Turner Commission on pensions led to the launch of the auto enrolment initiative, which has succeeded in getting a lot more people saving into private pensions. The current Pensions Commissioner, Baroness Jeannie Drake, called for a 'renewed national settlement on pensions'.
'The recommendations we present in our final report will address the need to secure adequate income in later life and a pension system that is fit for decades to come,' she says. 'The Commission will set out the course to improving future outcomes whilst ensuring the system is fair and sustainable within and between generations.
' The Pensions Minister, Torsten Bell MP, says: 'Britain has got back into the pension saving habit, but the job is only half done with tomorrow’s pensioners still on track to be poorer than today’s. 'The Commission warns that without action millions more people could be at risk of becoming reliant on state support in retirement. 'The Commission is clear that change must happen in the right way, with any recommendations for change implemented gradually.
The Government has ruled out any changes to automatic enrolment contributions this Parliament.
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