A third of UK pension savers have given up the prospect of retiring for any longer than five years, a study shows.
As part of our ‘Tackling the Savings Gap’ research initiative, over 2,000 pension savers were asked how long after retirement they expect to be dependent on their pension, with 16 per cent saying they have no plans to retire at all. A further 17 per cent said they are only expecting a retirement of less than five years.
We found that less than 18 per cent were preparing for the once-common 25 years+ retirement.
Over a quarter of respondents aged 55+, who under recent pension reforms can now legally access their retirement funds, have resigned themselves to less than five years of retirement while more than 45 per cent of UK savers polled said they were unable to put anything into their pension pot in the three months to August 2015. On average, respondents saved £52 per month into their pension pots.
The report also shows that respondents took on an average £1,272 worth of debt in the three month period. Of those questioned, 56 per cent said they believe it is now easier to get into debt than it was 10 years ago.
Commenting on the research, our managing partner David Harrison has said: “Longer life expectancy and conditions that have made it tough for many people to save, compounded by easy access to high-cost credit, are among several contributors to shifting retirement trends.
“To see so many savers expecting to retire for five years or less, however, is concerning and should serve as a wake up call to the government and financial services industry that more needs to be done to encourage people to better plan for retirement.”
The government is addressing low levels of retirement saving through automatic enrolment – the initiative requiring all businesses to enrol employees into a pension by 2018. By the end of the decade, participating eligible employees will see eight per cent of their salary invested into a pension each year, but we warn that even this will leave many savers short.
Our Savings Gap campaign shows savers believe an annual income of £23,000 is needed to live comfortably in retirement. But with the average salary in the UK currently £26,000, auto enrolment will generate a pension pot over a working life of £93,600 – barely funding four years of comfortable retirement.
For additional information on our ‘Tackling the Savings Gap’ campaign, click here.