It is widely assumed that the more people earn, the more they will save. However, the recent Scottish Widows UK Pensions Report reveals that this is not necessarily the case. Moderate earners are often the best savers while those further up the income scale may only be making a token effort.
Only 6 per cent of those earning over £50,000 are saving nothing for their retirement compared with 12 per cent of those earning between £30,000 and £50,000 and 26 per cent of those earning under £30,000.
However, one in five of those earning over £50,000 is making only a token effort to save for retirement and is putting aside under 6 per cent of income compared with the 12 per cent which we believe would give an adequate retirement income if saved consistently between age 30 and state pension age.
This means that, unless they have other sources they can rely on, they could easily end up with a retirement income of less than a quarter of their earnings. That will mean very significant sacrifices in their lifestyle.
A further 17 per cent of those earning over £50,000 are saving between 6 per cent and 12 per cent of income. This leaves 56 per cent who we believe are preparing adequately for retirement because they are saving at least 12 per cent of income or have a defined-benefit pension as their main source of retirement income.
This compares with the 59 per cent of those earning between £30,000 and £50,000 who are saving adequately.
So why are many high earners not saving more?
There are a number of potential reasons. One is that those earning over £50,000 a year are more likely than any other group to be self-employed and so do not have the potential for an employer contribution. Another is that these high earners are likely to have more dependants, both partners and children, than other groups.
Their financial priorities may well be centred round their families rather than retirement. But for many it is a case of not giving enough priority to saving.
Five out of six in this group believe they could save more, with an average of £250 a month each. This would be an additional 6 per cent of income for someone earning £50,000 a year.
However, only one in 10 said that they were very likely to increase their savings for the long term in the next 12 months. And the most common reason given for not saving more was that they believe they are already saving enough.
This suggests that considerable financial education is needed for many high earners. They may feel that saving a modest amount for the future is sufficient, without having a realistic view of what they need to accumulate to provide an adequate income.
This group should be fertile ground for advisers. They have money they could invest and need guidance to reassess their financial priorities. The focus of Government efforts to improve our savings habits tends to be on those much further down the income ladder, and rightly so, when the main concern is to reduce dependence on means-testing.
However, more effort is needed to reach high earners who are seriously undersaving.
Unless we can help them to put aside realistic amounts for their retirement, those who have previously lived comfortably could well end up as the nouveau poor.
Ian Naismith is head of pensions market development at Scottish Widows