More than one-fifth of people in the UK are failing to make any provision for their retirement, a survey by Scottish Widows has found.
The report, which covered 5,200 UK adults, found that 22 per cent of people were not saving for retirement, up from 20 per cent in 2011. The Scottish Widows Pensions Index looks at those between 30 years-old and state pension age who earn more than £10,000 per year. It also found 54 per cent of adults polled are failing to save adequately for retirement, a record number up 5 per cent from 49 per cent in 2011.
While retirement savings are falling, the report found people actually want a £200 increase in their annual pension income, from £24,300 in 2011 to £24,500 this year.
The report says the average saver, calculated on a £25,000 salary and 8.9 per cent saving rate between age 30 and age 65, would receive around half this target if they retire at 65.
It states the total pot for an average saver is around £150,000 in today’s terms which would only provide an annual pension of £5,700. With the addition of the state pension this would generate a yearly income of approximately £13,000 which is well short of the £24,500 annual income people are looking for and would mean a total shortfall of £300,000. To meet current expectations, an average saver would need to save an additional £4,500 a year or £375 per month to make up the difference.
Scottish Widows head of pensions market development Ian Naismith says: “These are alarming findings as UK pension provision has hit an all time low. People are saving less for old age yet their expectations remain high as the majority fail to recognise the harsh reality of retirement. With an aging population, and ongoing economic difficulties, it has never been clearer that we need to do more to shift people quickly from their unrealistic ‘rose-tinted’ expectations of retirement. They must either increase their savings substantially or change their expectations of when they might retire and how much income they will receive.
“Auto Enrolment presents a once in a lifetime opportunity to reverse these trends. But for this to be successful we need a compelling Government communications campaign to make clear in simple and understandable terms the need to save for retirement.”