How much money do you think you’ll have for retirement (and is this figure realistic)?
A recent survey by NOW: Pensions has revealed that young people (aged between 18 and 35) believe they will have a pensions saving pot of around £95,000 by the time they reach retirement age, despite the fact that almost 60% have not yet saved any money towards this – 53% in the 26-35 year age bracket and 65% in the 18 – 25 year age bracket).
For those workers who are currently saving towards retirement the average amount being put aside each month is just £22 – a long way short of the £122 required over 30 years to reach £100,000 (based on 5% per year investment growth). Even if people do achieve this amount it could typically buy an annuity giving a fixed income of between just £5,000 and £6,000 per year.
The advice to both individuals and businesses is clear – the sooner employees can start saving towards pensions the better. Auto enrolment legislation (meaning that employers will also have to contribute to a worker’s pensions when specific criteria are met) is a huge positive step in addressing the shortfall and will ensure contribution levels rise over coming years. Companies offering good pension schemes to employees now will be much more attractive to future recruits.
Morten Nilsson of NOW: Pensions said:
‘Auto enrolment will go a long way to getting young people into the savings habit but the sooner they start saving and the more they set aside each month, the easier it will be. While a £100,000 pension pot seems like a healthy amount, men aged 25 today are likely to live until they are 88 and women are likely to live until they are 91 [based on Office for National Statistics data] which means that this pot has to fund around two decades of retirement.’
*based on 5% per year investment growth
Have you got a pension scheme in place for your employees and do you understand the contributions that you and they will need to make? Are you thinking of bringing your staging date forwards to encourage employees to start saving earlier towards their pensions (and attract new recruits)?
IRIS has auto enrolment training seminars available throughout the UK to help companies understand how the new legislation will affect them and has already assessed over 570,000 workers to ensure the correct pension contributions are made. IRIS works with many leading pension providers including NOW and NEST.
To find out more about IRIS auto enrolment solutions please call the IRIS team on 0344 815 5700.