Wednesday, January 27, 2016

Are we saving enough for retirement? England

In England The answer also appears to be No

One in seven people retiring this year have no personal pension savings and will have to fall back on the state pension and other types of support in their old age, new research reveals.

The full state pension is currently £6,000 a year if you have made enough contributions and pension credits will top this up £7,860, but beyond this people will probably have to use up other savings, depend on family, or continue working to boost their income.

According to Moneywise  almost 12 million people are failing to save enough for their retirement, the government has warned. In a wide-ranging new report on pensions, it says 11.9 million individuals are "saving too little", but could get back on the right track with only "modest changes".

Pensions minister Steve Webb said that, of the 11.9 million, almost half are at least 80% of the way towards achieving their retirement income target, while only 8% are less than 50% of the way there.

"While the state will always provide a decent safety net so people can get by, anyone wanting to see their standard of living maintained into old age needs to make their own provision too," Webb explained.

"This new research shows that by saving just a little more, a huge number of working people could make their future retirement so much more comfortable."

Webb said that people are under-saving due to three main reasons. Some do not have a full work history, meaning they miss out on years' worth of contributions to workplace pensions as well as National Insurance contributions that count towards the State pension.

Many people fail to contribute to private pensions while they are in work, and those that do are not saving enough in private pensions.

Women are more likely than men to have no personal pension, with 21 per cent failing to save into a private or work scheme compared with 9 per cent of men, according to a Prudential survey of people retiring this year.

Women's anticipated life span will increase to 87.6 years and men's to 85.7 years for people living in England and Wales in 2030, according to research by Imperial College London. That's longer by one year for women and 2.4 years for men than Office for National Statistics projections for the same year.

Some 44 per cent of people retiring this year are in much less lavish defined contribution pension schemes, which take cash from employers and workers and invest it to provide a pot of money at retirement. This can then be used to generate an income, usually from either an annuity or an invest-and-draw down scheme.

Prudential found that despite the large number of people retiring with no pension, 54 per cent of this year’s retirees feel financially well prepared, up from 47 per cent in 2014. Some 50 per cent of women feel well-prepared compared with 59 per cent of men.

Meanwhile, women anticipate the state pension will account for 41 per cent of their expected retirement income compared with 31 per cent for men.

Vince Smith-Hughes, retirement income expert at Prudential, said: 'The reforms to the ways that people can use their pension savings, that came into effect in early April, present retirees with many new choices.

'However, only those with their own pension savings will be able to benefit from the new choices, while people who rely solely on the state pension are likely to have to face serious financial belt-tightening when they give up work.

'For many people reaching the retirement milestone this year, their income will come from a number of sources. Our research shows that the state pension will make up a significant proportion of income for most people – but it is important not to overestimate its value.

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