Millions of people across the UK mistakenly believe they are saving enough to retire because they are paying the right amount to the government, a new study by B&CE, a provider of The People’s Pension, finds.
His new report, “Pension Adequacy: The Perspective of Retirement Savings,” shows that in the tenth year of automatic enrollment, more than half (57%) of self-enrolled retirees make the minimum contribution required by law, and nearly two-thirds (65%) receive minimum contributions. their employers. Research shows that in many cases, automatic registration fees are a major source of people’s savings.
The minimum contribution rate of eight per cent of the group’s salary is likely to provide only a ‘basic’ pension level, according to the Pension Standards of Life Association’s Pension Standards, which states that contributors will need a pension of £ 10,900 a year for the base level pensions, £ 20,800 for a moderate retirement level and £ 33,600 for a comfortable retirement level for a single person.
However, the study found that only seven percent of depositors know they are saving enough just for “basic” retirement; the rest provide for “moderate” or even “comfortable” retirement. It is alarming that four out of ten people believe that because the contribution rates are set by the government, they are saving enough.
Commenting on the findings, Phil Brown, B&CE’s Director of Policy, said: “For most workers across the UK, it’s better to put something off to retirement than save nothing at all – especially considering that your employer is also contributing. But we cannot avoid the fact that millions of hard-working people do not save enough for the level of pension they expect. Accessibility obviously plays a role in this, but research shows that in most cases, people believe that because they are saving what those who run the country have told them, they are saving enough. ”
The Pension Commission in 2005 reported that contributions of about 16 percent of salary would be required to achieve a decent retirement income, which is about two-thirds of someone’s pre-retirement salary. It was assumed that half of this would come from automatic recording and the other half from additional voluntary savings.
However, almost half (43%) of all savings did not think about paying more for retirement, almost half (46%) did not know that they were allowed to pay more than the minimum, and two thirds (64%) of people had only less than £ 10,000 extra savings.
Today, The People’s Pension, which serves almost 6 million people across the UK, is urging the government to set out plans to revise the minimum contributions required for automatic enrollment, and to set deadlines for the implementation of the automatic enrollment recommendations for 2017. revision of enrollment, if economic circumstances permit, which requires workers over the age of 18 to be subject to automatic registration and contributions to be calculated from the first pound earned.
Although there is growing evidence that the minimum contribution should be increased, the leading pension provider warns that the government should carefully consider whether this is the right course of action and, if so, at what level must be established and who should bear the burden of the increase – the employer or the employee.
Although the low contribution rate is partly due to the ignorance of depositors, a significant proportion of pension depositors are already struggling to cover their daily living expenses and are concerned about rising cost of living.
Fifteen percent of retirees reported lagging or missing at least three payments on credit or domestic accounts over the past six months, and 15 percent are constantly being transferred until they are paid.
Against the backdrop of rising energy costs and inflation, nearly half of those who save thought they would have to give up if employee contribution rates are set higher, and many savers felt that employers ’contributions should at least match what the employee now pays .