The Pensions and Lifetime Savings Association (PLSA) has called for savings targets to be put into place in order to help individuals save adequate funds for their retirement.
According to research published by the PLSA, more than 13 million people have not saved enough for a comfortable retirement.
In addition, 78% of people aged between 18 and 64 are unsure of where to look to find out if they are on track with their retirement savings.
The trade association has suggested that the UK could look to implement retirement income targets, similar to those used in Australia.
Commenting on the issue, Graham Vidler, Director of External Affairs at the PLSA, said: ‘We all know we need to save for retirement, but few of us know how much we might need to live on or whether we are on track to hit that target.
‘We are . . . looking to develop a new set of retirement income targets that will empower savers by providing tangible targets for them to achieve. We look forward to working closely with stakeholders to build a retirement savings market which is truly focused on the end users – savers.’
The PLSA has launched a consultation on the matter, which will run until January 2018.
The amount of money savers put into cash Individual Savings Accounts (ISAs) has fallen, data published by HM Revenue & Customs (HMRC) has revealed.
During 2016/17, £39.2 billion was saved using cash ISAs – a significant fall when compared to 2015/16’s figure of £58.7 billion.
The data also revealed that the amount invested in stocks and shares ISAs reached a ‘record high’ of £22.3 billion in 2016/17, up from £21.1 billion in 2015/16.
Meanwhile, separate data published by the Office for National Statistics (ONS) revealed that the savings rate fell to 1.7% during the first quarter of 2017.
The ONS stated that the savings ratio has been falling ‘since 2015’, and suggested that it has been affected by low interest rates, which have helped to reduce the return on accounts.
Commenting on the data, Steve Webb, Director of Policy at Royal London, said: ‘These latest figures show that the shine has really come off cash ISAs.
‘Low interest rates, coupled with rising inflation, mean that cash ISAs have delivered negative real returns year after year.
‘It is to be hoped that this slump in saving through cash ISAs means that investors have started to realise the risks associated with keeping their money in cash.’
An estimated 28,000 individuals have taken out cash Lifetime ISAs with Skipton Building Society – the only provider currently offering a cash version of the product.
It revealed that the new cash Lifetime ISA is proving to be popular with younger savers in particular: 51% of accounts have been opened by individuals under the age of 30.
Introduced in April, the Lifetime ISA allows savers under the age of 40 to deposit up to £4,000 each tax year. They will then receive a 25% bonus from the government on any savings put into the account before their 50th birthday.
The tax-free savings and the government bonus can be put towards a deposit for a first home in the UK, or can be withdrawn from the age of 60 for retirement purposes.
Skipton Building Society’s cash Lifetime ISA currently offers a rate of 0.5%.
Kris Brewster, Head of Products at the building society, said: ‘We believe the Lifetime ISA could make a real difference to a new generation of savers, not only in helping them get a foot on the property ladder but providing them with another option to help them save for their future too.’
Other providers offer stocks and shares versions of the Lifetime ISA. However, some have chosen not to offer the product due to its complicated rules.
Growth in personal debt slowed during May, data published by the British Bankers’ Association (BBA) has revealed.
Personal debt grew by 5.1% during May, compared to 6.4% in April. Borrowing via loans and overdrafts slowed down in particular, the BBA said.
House purchase approvals also experienced a deceleration, totalling 40,347 in May. This number is 3.3% lower when compared to May 2016, and down on the monthly average of 41,923.
The BBA found that consumers are also saving less: in the year to the end of May, personal deposits grew at a rate of 2.6% – representing the slowest annual rate of growth in saving since 2011.
Commenting on the data, Eric Leenders, Managing Director for Retail Banking at the BBA, said: ‘In the run up to the General Election, credit growth in personal loans, cards and overdrafts has slowed, which was reflected in lower spending, with increased household costs affecting growth in deposits and saving.
‘Businesses appear to be weighing up their options before raising finance to fund projects or developments. After a long period of subdued company borrowing, overall growth is starting to stabilise at a modest rate.’
An analysis carried out by insurer Royal London has revealed that more than three million people employed by large businesses are failing to claim around £2 billion a year in additional pension contributions from their employer.
Many UK workers pay a standard percentage of their wage into a pension, and their employer contributes as well. Some large firms also offer to ‘match’ additional employee pension savings when they save more.
However, Royal London has found that many workers are unaware of this, and have therefore not taken advantage.
It calculated that around £2 billion in employer pension contributions could be available to employees if they choose to save to a maximum as opposed to a minimum.
Steve Webb, Director of Policy at Royal London, stated: ‘Millions of workers are missing out on ‘buy one, get one free’ money from their employer in the form of ‘matching’ pension contributions.
‘At a time when money is tight for many people and pay rises may be limited, getting your employer to contribute more to your pension can be a very cost-effective strategy.
‘When individuals are thinking about where to put their money to get the best return, the chance to more than double your money through an employer contribution and tax relief from the government takes a lot of beating.’
A report published by the World Economic Forum (WEF) has called for the retirement age in financially stable countries to rise to ‘at least 70’ by 2050, in line with increases in life expectancy.
The report revealed that babies born in 2017 can expect to live to at least 100 years old. As a result, it suggested that individuals in nations such as the UK, US, Canada and Japan may have to work until at least age 70. The UK state pension age is already set to rise from age 65 in 2018 to 68 by 2046.
Policymakers have been urged to consider a handful of key strategies in order to help alleviate the situation. Governments should encourage individuals to save regularly within savings products, and should also review their national retirement age.
The WEF also called for education systems to teach financial literacy.
Michael Drexler, Head of Financial and Infrastructure Systems at the WEF, commented: ‘The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change.
‘We must address it now or accept that its adverse consequences will haunt future generations, putting an impossible strain on our children and grandchildren.’
A report published by insurance company Aviva has revealed that the savings gap between low and high income families in the UK has grown by 25% year on year.
According to Aviva’s latest Family Finances Report, families with low incomes have just £95 in savings and investments, whilst those with high incomes have an average of £62,885.
25% of families in the UK are now classed as low income, whilst 8% are classed as high income.
The report also suggested that families’ savings have fallen to the lowest level in 18 months as a result of a decline in typical monthly incomes. Such incomes have fallen to £2,006 – representing a two-year low.
Paul Brencher, Managing Director of Individual Protection at Aviva, stated: ‘The gulf between low and high income families is showing signs of widening, in a worrying indication that those less fortunate are finding their finances increasingly stretched.
‘Without a financial back-up, any sudden unexpected expense could put low income families in particular under added pressure.’