The Generation Who Can't Afford to Retire
25% of workers aged 55 to 64 have no private pension. With this rising to 42% across all age groups, could we be unable to afford retirement?
The New State Pension, available to men born on or after 6 April 1951 and women born on or after 6 April 1953, is currently set at £155.65 a week to those who have paid 35 years of National Insurance contributions.
Tom McPhail, head of retirement policy at financial advisers Hargreaves Lansdown, is clear that he doesn’t think we can rely only on the state pension. “How sufficient is the new state pension? That’s an easy one to answer: Not. It’s not,” he said.
Research by Scottish Widows and Saga found that whilst the amount we’re saving into private pensions is not enough, it’s partly due to widespread underestimation about how much you need to save to live comfortably in retirement. Additionally, a 2016 report from Aviva underlined the issue, over-45s expect their pension fund to generate £12,590 a year on top of their state pension – but their current savings will deliver less than a third of this target income.
Former Conservative MP, David Willetts, recently discussed pension savings and had this to say: “We could find ourselves facing a whole new generation of poor pensioners who, on average, are even worse off than the average poor pensioner today. Because far more of them were unable to get on the housing ladder, they will be paying rent long past the point when their parents had paid off their mortgages,” he says.
The consequences of this will ricochet into society, Willetts warns. “If we don’t have systematic responses now to the pension problems coming down the line, future generations will suffer.”
The Importance of Auto Enrolment
With the New State Pension being set at £155.65, and a growing number of people choosing not to save into a private pension, the importance of auto enrolment is becoming ever more clearer. Auto enrolment is helping to ensure that once someone retires, they have an additional source of income on top of their state pension and other savings they may have.
With this in mind, it’s important that the 700,000 businesses reaching their staging date in 2017 get prepared early and communicate the legislation to their employees.
To learn more about auto enrolment, visit our On-demand Webinars page to download Bite-size Auto Enrolment for Small Businesses and start getting to grips with the legislation and the long-term benefits it can bring to your workforce.
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