Nearly half the working population are not saving enough for retirement, and one fifth are failing to save anything at all, according to a major study on pensions.
People want, on average, an annual retirement income of £24,300 to live comfortably, down from the pre-recession figure of £27,900. Although three-quarters of those questioned understand the need to take personal responsibility for their future, only 51% save adequately for their old age. This drops to around 25% when those with a final salary pension are excluded.
The seventh annual Scottish Widows UK pension report, based on interviews with 5,200 adults, shows there is "widespread and ingrained inertia" across the country, with savings levels remaining broadly consistent during the past five years, regardless of the economic downturn.
The Scottish Widows average savings ratio – which tracks the percentage of income being saved for retirement by UK workers not expecting to get their main retirement income from a final salary pension – remains at just over 9%. This is a 3% shortfall on the 12% the insurer believes people should be saving to achieve a comfortable retirement.
Despite recent moves to abolish the default retirement age (the minimum age at which employers could force staff to retire) and raise the state pension age, the average age people would like to retire at remains the same as last year at 61 years and eight months. Only one in five said they would be happy to carry on working until the age of 70.
Ian Naismith of Scottish Widows said: "Put simply, people need to save an extra £58 per month on average to prepare adequately for retirement and make up the shortfall we are seeing currently. That is roughly the cost of a cup of coffee every day.
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"Even though for many this is realistic, and is in under the average £97.10 per month people say they can afford, we appreciate the difficulty in setting aside extra money. It's about breaking through that inertia. And for some the amount that needs to be saved will be higher but it's about taking small steps, getting on to the savings ladder and, more importantly, staying on it. Much higher saving levels are needed to get towards the average £24,300 a year people aspire to. The message is that everyone should be putting aside as much as they can afford for their retirement."
Tom McPhail, pension expert with independent financial adviserHargreaves Lansdown said that according to Office for National Statistics figures, the average pension savings of people retiring between the ages of 50 to 64 last year was £91,900, enough to produce an annual income of about £3,500 to £4,000 depending on your sex and the type of annuity you buy.
"To produce an income of about £24,000, you would need a pension pot of about £400,000 once the state pension has been taken into account," he said. "People today face a very simple choice: to save more, retire later, or live on less in retirement."
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