Having a solid retirement plan in place is key to a worry-free future
As we enter our later years, it's more important than ever to have a solid retirement plan in place. Unfortunately, for many of us, that simply isn't the case. According to recent figures, one in six people over the age of 55 in the UK have no pension savings whatsoever[1].
Private pension
This leaves them potentially facing a very difficult future, especially if they are unable to continue working into their later years. There are a number of reasons why someone might not have any pension savings.
Perhaps they've never had a job that offered a pension. Or maybe they've been self-employed and haven't been able to contribute to a private pension pot. Whatever the reason, it's clear that there are many people out there who are not prepared for retirement.
Spare income
Despite the fact that the government has been trying to encourage people to save for their retirement through initiatives such as auto-enrolment, there are still too many Britons who have no pension savings at all.
Even prior to the cost of living crisis, there have been a number of reasons why this might be the case. For some people, they simply may not be aware of the need to save for retirement. Others may not have enough spare income to put into a pension pot after covering their essential living costs.
More comfortable
However, the most common reason is people believe they will have plenty of time to start saving later on in life. But this is not the case. Even if you are in your 20s or 30s, it is never too early to start saving for retirement. The sooner you start, the more time your money will have to grow.
Findings also highlight the fact that one in six people (16%) who are within sight of their retirement still have no private pension savings, and consequently are missing out on the opportunity to make their life after work more comfortable.
Alarming number
At least 17% of people in the UK aged 55 and over admit to having no pension savings (other than the State Pension), which is only slightly better than the average for Britons as a whole – 21% of whom say they have no private pensions.
What this research shows is that an alarming number of people are effectively ‘sleepwalking’ towards their retirement without adequate preparations. But, there are signs that as people grow older, they are becoming aware that a lack of pension savings is a problem – though perhaps not quickly enough.
Pension deficit
The issue is most visible among adults aged under 35. Nearly a quarter (24%) of this group claim to have no pension savings at all, despite being a generation to benefit from auto-enrolment into workplace pensions. After 35 this drops to one in five, and then to one in six for the over-55s. Clearly, people do start to save more as retirement draws nearer, even if they have missed out on the opportunity to save over many years.
Lack of pension savings is a particular issue for those not in full-time employment. Encouragingly, just 8% of respondents who worked full time said they had nothing in their pension. But among part-time workers this figure was one in four (24%), indicating that part-timers face a potential pension deficit when they retire.
Worrying statistic
The people worst affected tend to be those currently not working at all – whether because they are unemployed or because they are full-time parents. Nearly 60% of this group said they had no pension savings. Where this is because of full-time parenthood, the parent in question may be relying solely on their partner’s pension in later life. This is a risky strategy, both because that pension may not be enough for both of them, and because of the risk of relationship break-up.
Another worrying statistic highlights that one in five people simply don’t know how much they have in their pension savings. Curiously, this uncertainty grows rather than shrinks as people get older: while 14% of under-35s are unsure, this rises to 22% between the ages of 35 and 54, and then to 24% among the over-55s.
Substantial income
It may be the case that many of those who think they have no pension savings are wrong, and that they do have pension pots from previous jobs (or even their current job) that they don’t know about. The first step for anyone who thinks they are pension-less is to contact the government’s Pension Tracing Service and search through their previous employers to see if they were ever a scheme member.
However, some people will reach the age of 55 (the earliest age that someone can access pension pots) and find that they genuinely have no pension savings. But this isn’t a reason to give up and assume it’s too late. Although a person close to retirement has a lower chance of saving enough to provide a substantial income, pensions can help your money to go a lot further. If you're in this situation, it's important to take action as soon as possible.
Source data: [1] Survey by Unbiased and Opinium of 2,000 non-retired UK adults, conducted June-July 2020.
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