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Many employees still in the dark about pension saving

Young female employee working on a laptop

Thanks to automatic enrolment, more people than ever before are saving for a pension. By the end of December 2020, more than 10 million workers across the UK had been automatically enrolled into a workplace pension.

But one in five non-retirees are still not paying into any pension and many people remain in the dark about saving for retirement, suggesting that employers could support their employees with more financial education in this area.

In a survey by Yonder Consulting for the Pensions and Lifetime Savings Association (PLSA), the main type of pension held among non-retirees is a workplace defined contribution pension (42%). Similar numbers say they have a defined benefit pension (17%) as a personal pension (16%).

However, while automatic enrolment has undoubtedly been a success, a quarter of the 2,075 people surveyed stated that they still do not have a pension (25%), while 5% don't know if they have a pension or not. And one in five non-retirees say they are currently not paying into any pension (20%).

Of course, as well as making arrangements for saving into a pension, you also need to make sure you are saving enough for the lifestyle you want when you stop working.

In the PLSA survey, only 53% of respondents knew that retirees receive around £9,000 per year from their state pension. Over-55s were more likely to identify correctly how much retirees receive (70%), compared to 40% of those aged 18-34.

Among working age people who are saving for their retirement, over half are worried that they are not saving enough (56%), with only one in five (21%) confident that the amount they are saving in a pension is sufficient.

According to the PLSA, a single person will need around £10k a year to achieve the minimum living standard, £20k a year for moderate and £30k a year for comfortable. For couples, the corresponding figures are £15k, £30k and £45k.

Based on these retirement income levels, two in five (42%) non-retirees believe they will be able to achieve a minimum lifestyle, while more than a quarter (28%) believe they will be able to achieve a moderate lifestyle. Just one in six (16%) believe they will able to achieve a comfortable lifestyle.

Encouragingly, however, three-quarters (75%) of non-retirees believe they could save extra into their pension to boost their pension savings.

One in six (17%) say they could only pay in less than £25 per month, while just over a quarter (26%) say they could pay in £25 to £50 in additional contributions. Another quarter (25%) say they could pay in between £51 and £200 more, and 7% say they could pay in more than £201 per month in additional contributions.

Nigel Peaple, director of Policy & Advocacy at the PLSA, urged people to "take stock" of their pension saving and check that they are saving the right amount to achieve the retirement lifestyle they want.

Posted by Fidelius on September 20th 2021

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