UK Pension Saving Shortfall Costs About £11bn Yearly
Savers in defined contribution schemes are losing more money to pensions due to a lack of effort to contribute to their funds according to a poll.
Aon Hewitt commissioned a poll that allowed the agency to analyse about 2,000 pension savers with 16 per cent having saved enough for retirement while the rest of the figure did not follow suit.
The analysis of the data suggested that around 4m people are undersaving for their later lives. About £1,400 annually is needed to fulfil the gap for pensions employees currently face.
“Auto enrolment has successfully increased participation in pension schemes, but the vital next step is to ensure that these new entrants save a sufficient amount for retirement,” said Sophia Singleton, partner and head of DC consulting at Aon Hewitt.
“It is crucial for employers and trustees to have the right structures in place to make retirement saving easier to understand, which would encourage employees to contribute more.”
The survey was performed by YouGov. The raw data showed 37 per cent of pension scheme members paid less than 5 per cent of their yearly salary to their pension. About 48 per cent provided about 5-10 per cent of their salary in pension contributions.
Meanwhile, Aon found that almost all pension savers in the United Kingdom have no idea how much their pension savings could guarantee them in the future. The agency said this highlighted the huge disconnect between scheme members’ expectations and the issues on pension saving.
Morten Nilsson, chief executive of NOW Pensions, a workplace pension provider, said: “While auto enrolment is working for many, it’s not working for all.
“This reinforces the importance of examining the auto enrolment trigger as part of the 2017 review, as at the moment too many workers for whom auto enrolment was intended are being excluded.”