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DWP warns 12 million under-saving for retirement

Some 11.9m people in the UK are not saving enough for retirement, according to research from the Department of Work and Pensions.

The research, published today, warns mid-range and high earners currently face the biggest drop in spending power when they leave work. 

Of the 11.9m undersavers, the DWP analysis shows only 49 per cent (5.8m) are more than 80 per cent toward their target retirement saving.

It says one million are less than 50 per cent of the way to their retirement target, while 5.1m have achieved 50 to 80 per cent of their target.

The targets are calculated based on the ratio of pension income to earnings between age 50 and state pension age. It sets an income replacement target of 80 per cent for lower earner down to 50 per cent for those earning more.

The DWP says more needs to be done to encourage earning between age 50 and state retirement age to prevent more people falling below target retirement rates.

Pensions minister Steve Webb says: “This coalition Government’s sweeping reforms of the pensions system will make a huge difference to the long-term financial prospects of most working age people. But while the state will always provide a decent safety net so people can get by, anyone wanting to see their standard of living maintained into old age needs to make their own provision too.

“This new research shows by saving just a little more, a huge number of working people could make their future retirement so much more comfortable.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. This will only get worse as people refuse to pay for advice and do their own thing.

  2. Whatever’s done to the retirement funding system, you can’t get a quart from a pint pot, even by scrapping the annuity (rates) trap. What the government needs to embark upon is a serious programme of education to bring into stark relief in the public mind the dangers of not saving for retirement, like those ad’s from yester year that featured chillingly contrasting pictures of two retired couples, one of which had made advance provision and the other that hadn’t. The other good one was Allied Dunbar’s pair of simple graphs. One showed the drastic plunge in income at retirement as a result of having saved nothing, whilst the other showed the vastly smaller fall as a result of having set aside just a modest amount throughout one’s working life. They were clear and simple pictorial messages, easily understood even by people with the most modest grasp of financial planning.

    Simplification is the key but, unfortunately, the latest reforms, though laudable in principle, have in large measure made the retirement planning landscape a whole lot more complicated.

  3. I am not sure the DWP Treasury or HMRC have a grasp on the situation as half the time they don’t even know what assets people own unless it is being sold such as a BTL or even a business. The ratio between pension and earnings income is a blunt instrument and very vague in nature. I think the key to encouraging people to save is not reform of pensions (although it is welcome) but the message of ‘make a plan for yourself and your future’. Too many people still believe wrongly the state will support them. The message should be that the state will only keep you in a modest standard of living. If you want to enjoy retirement, be comfortable or even retire early then it is all up to you.

    The simpler the message the better.

  4. Oh for heaven’s sake stop the hand wringing and crocodile tears.

    If you are worried raise tax and pay a decent State Pension. We still pay the lowest State Pension in the OECD.

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