15m failing to pay into a pension
A shocking new study has revealed that 15 million people have no private or occupational pension savings – leaving them with only the State Pension on which to live out their retirement years.
Could you survive and live the retirement you planned on this amount?
The State Pension is currently £159.55 a week – which is the full amount you receive, provided you have the maximum number of qualifying years of National Insurance payments when you reach State Pension age.
That State Pension age varies according to the year in which you were born and is currently 65 for men and 60 for women (although this is gradually increasing to 65 for women, too). From the year 2019, this increases to age 66 for both men and women, whilst a further increase from age 66 to 67 is planned for 2026 to 2028. It might be increased still further in the future.
The stark fact of the matter is that an estimated one of three of those who are now in their 50s and therefore fast approaching retirement are likely to have nothing more than their State Pension on which to survive.
Financial Lives Survey
This is one of the alarming findings of the Financial Conduct Authority’s (FCA) recent Financial Lives Survey (reported by the Guardian newspaper on the 21st of October 2017), which concluded that some 15 million people have no private or occupational pension arrangements – leaving them with only the State Pension on which to live out their retirement years.
The age group at greatest risk, of course, is comprised of those who are already aged 50 or more, since they have so relatively few years in which to start pension saving – with 32% of the FCA’s sample saying that it was already too late for them, 26% claiming that they could not afford to make such savings, and 12% saying that they planned to rely on a pension earned by their partner or spouse.
The website Financial Planning Today explains that the FCA’s Financial Lives Survey 2017 is designed to help understand areas of financial vulnerability in the ways in which personal finances are arranged.
What do you know about your own pension arrangements?
If you are among the two-thirds of the working population who have made pension arrangements in addition to the State Pension, what do you actually know about those arrangements?
Four out of every ten employees in the 35 to 44 year-old age bracket, for example, had no idea how much their employer is currently paying into their pension pot, found the FCA.
There may be similar confusion amongst employees about whether theirs is a defined benefit or a defined contribution pension scheme. The former – also known as a “final salary” scheme – is widely recognised as especially generous, but has become far less widespread and currently accounts for only about 16% of the working population.
More common are defined contribution schemes where the size of the pension pot is entirely dependent on the vagaries of the pensions’ investment market.
One of the results of these vagaries is that the majority of people have a relatively small total sum in their pension pot, with four out of ten people having less than £5,000 and only 12% having more than £100,000. It may come as no surprise therefore, that half of those interviewed for the Financial Lives Survey found their current pension arrangements will not generate enough to live on throughout their retirement.