Research carried out by insurance provider Aviva has suggested that many older workers are struggling to save for a comfortable retirement.
Aviva found that 18% of workers in their fifties and sixties are ‘unable to save anything for retirement’, with two in five older employees describing themselves as ‘occasional’ or ‘absent’ savers.
49% of employees in their fifties have not yet calculated how much money they will need to retire, Aviva found.
The research also revealed that 60% of older workers are yet to build upon their savings as they approach retirement age.
Lindsey Rix, Managing Director of Savings and Retirement at Aviva, said: ‘It is worrying to see so many of the UK’s older workers in the dark over how much they need to save to afford a comfortable retirement.
‘As the cost of living creeps up and wage growth continues to slow, saving for retirement in the current climate is particularly challenging.
‘These findings show the importance of industry and government taking action to help consumers become better informed and active savers.’
Data published by the Office for National Statistics (ONS) has revealed that retirement income has been ‘boosted’ by private and workplace pensions over the last 40 years.
The ONS found that 80% of retired UK households received income from a private pension in 2016, compared to just 45% of retired households in 1977.
It revealed that just 21% of retired households had an annual disposable income over £10,000 in 1977: in 2016, 96% of retired households had a disposable income of £10,000 or more.
The ONS also found that incomes have grown at a faster rate for older individuals than they have for the young.
Anna Dixon, Chief Executive at the Centre for Aging Better, said: ‘We have seen a dramatic and necessary reduction in pensioner poverty since the 1970s. Being financially secure is a key part of a good later life.
‘However, these averages mask inequalities. In particular, the growing disparity between those who have been unable to save into a pension and those who have not.’
More than a third of people planning to retire this year are still providing financial assistance to family members, according to research from insurance company Prudential.
Some 34% of retirees expecting to retire in 2017 are paying an average of £260 a month to help out family members, adding to the squeeze on their own retirement incomes.
Of this figure, the study found that the most likely financial dependents are the individual’s own children (45%), while some 24% are supplementing the incomes of their grandchildren and partners.
Despite many people providing financial support to their loved ones, the research revealed that around one in three (34%) of this year’s class of retirees still expect to leave an inheritance – up from 28% in 2016.
The average inheritance is expected to be in the region of £173,000.
Commenting on the findings, a spokesperson for Prudential said: ‘With life expectancy increasing rapidly it is not unreasonable to expect the members of the Class of 2017 to be looking forward to a retirement that will last 20 years.
‘However, for those providing financial support to their dependants it is likely to cost them an average of £62,000 over the course of their retirement – accounting for a significant proportion of their pension pot and impacting the income they can expect to live on,’ she said.
We can help you plan for a prosperous retirement – please speak to us for advice.
More than half of the 25.5 million individuals in employment in the UK are at risk of not having a satisfactory income in old age, the Pensions and Lifetime Savings Association (PLSA) has suggested.
A report by the pension industry body defined an ‘adequate retirement income’ as one that reaches the ‘target replacement rate’ – 67% of the amount earned before retirement.
Some 13.6 million workers are at risk of not achieving this rate, according to the PLSA.
The report also revealed that 1.6 million people are at ‘high risk’ of not meeting the minimum income standard of £9,500 set by the Joseph Rowntree Foundation.
However, the analysis suggests that auto-enrolment will leave individuals an estimated £2,500 per year better off in retirement.
Graham Vidler, Director of External Affairs at the PLSA, commented: ‘Automatic enrolment is set to deliver a tangible improvement in the retirement incomes of millions of people, but there is still work to do.
‘It is clear from our analysis that minimum contributions under automatic enrolment need to increase to at least 12%.’
Meanwhile, Frances O’Grady, General Secretary of the Trades Union Congress, stated: ‘Employers must step up and show they’re prepared to put more into workplace pensions alongside their employees. And the government must improve auto-enrolment so it delivers a decent pension for everyone.’
The number of individuals with a workplace pension reached a record high in 2015, new data from the Office for National Statistics (ONS) has revealed.
The figures show that total membership of occupational pension schemes in the UK rose to 33.5 million in 2015 – a rise of 10% when compared to the figure for 2014.
Active membership of occupational pension schemes totalled 11.1 million: 5.5 million of these were in the private sector, with 5.6 million in the public sector.
However, the average total contribution rate for private sector defined contribution schemes was just 4.0% of pensionable earnings in 2015. The ONS stated that this is ‘broadly comparable’ to the previous year’s figure.
Experts have warned that this contribution rate needs to change to ensure that workers have enough for a comfortable retirement.
Commenting on the data, Frances O’Grady, General Secretary of the Trades Union Congress (TUC), stated: ‘Automatic enrolment has made a good start by bringing millions more people into workplace pensions.
‘But it is a job half done. Too many women and lower-income workers still miss out.
‘And we should be very concerned about plunging pension contributions. Millions who are doing the right thing by paying into a pension remain at risk of falling into hardship in old age.
‘Next year’s review of automatic enrolment must be used by the Government to provide a long-term plan for how workplace pensions will provide a decent retirement income for low and middle-earners.’
Pension providers and banks are urging the Government to delay the April 2017 launch of the new Lifetime ISA, warning that they will not be ready to offer the savings product by this time.
The Lifetime ISA was announced in the 2016 Budget by the former Chancellor, George Osborne.
It will offer Government-backed support to first-time home buyers and seeks to encourage those aged under 40 to begin saving for retirement.
Pension providers Aegon and Standard Life have stated that they have delayed their plans until final details regarding the Lifetime ISA are released.
The Financial Conduct Authority (FCA) is yet to consult on the initiative. Steven Cameron, Pensions Director at Aegon, stated that a consultation is ‘likely to take three months’ to carry out.
Meanwhile, a spokesperson for Standard Life said: ‘As we want the Lifetime ISA to be a success, we would prefer that its launch is delayed until providers receive more detail on the product and how it is to be implemented.’
The Treasury said that full details would be confirmed in the autumn.
A minority of individuals making use of new pension freedoms have been warned that they may be ‘withdrawing too much too soon’ from their pension pots.
New data from the Association of British Insurers (ABI) has suggested that a small number of savers may be withdrawing cash from their pots at rates that would see their money run out in a decade or less.
The data revealed that 4% of pots where withdrawals were made had 10% or more of their value extracted.
However, the ABI also stated that, after the first full year since pension freedoms were introduced, most individuals are being sensible.
Yvonne Braun, director of policy, long-term savings and protection at the ABI, said: ‘New data released shows that more than half of pots are having less than 1% withdrawn a quarter, which seems to indicate most people are taking a sensible approach.’
A Government spokesperson commented: ‘We are working with our partners, such as Pension Wise and the Department for Work and Pensions, to ensure consumers are protected and that there is clear information to help people understand their options.’
Since April 2015, retirees aged 55 or over have been able to take advantage of new rules which give them complete freedom over their pension pot and how they choose to generate an income in retirement.