Record pension savings
Pension saving – as ever, there seems to be both good news and not so good news.
The good news…
There is some evidence that the message might finally be getting through.
A story in the Express newspaper on the 6th of June 2018 quoted figures released by the Department for Work and Pensions (DWP) showing that record numbers of people are now saving towards their retirement pensions.
The total value of pension savings – made by 84% of members of workplace pension schemes – had reached £90.3 billion in 2017.
Especially encouraging is the fact that record numbers of those under the age of 30 (79% of them) are now also making pensions savings – a similar proportion to the rest of the working population.
The growth in numbers and in the amount saved has been helped, of course, by the introduction in 2012 of compulsory automatic enrolment in company pension schemes – ensuring that each employee saved at least 5% of their earnings.
As a result, in 2017, employees contributed a total of £27.5 billion to occupational pension schemes, and their employers added a further £53.8 billion. Tax relief on pension contributions topped up the overall total by a further £9 billion.
Despite government ministers’ praising what has been described as the revolution in pension savings achieved by automatic enrolment, many consider that still more needs to be done. The Express quotes some sources, for example, pointing out that the minimum savings level of 5% of salary is scheduled to increase to 8% by April 2019, a target of at least 12.5% is likely to be more realistic.
… and the not so good news
It is still likely that many people are going to start their retirement falling far short of the financial targets necessary for a comfortable life.
By the time the current “millennial” generation reaches retirement age, they are likely to need a pension pot of some £260,000, according to former pensions minister Steve Webb, as quoted in the Guardian newspaper on the 16th of May 2018.
For those who have not managed to buy their own home, the news is worse still, since the estimated pension pot required climbs to £445,000 – based on an average of £6,554 that will need to be paid to their private sector landlords.
Those figures need to be set against the amount currently being saved in occupational and private pension schemes. The former pensions minister estimated that the sum is currently only between £30,000 and £40,000.
Still worse is the situation for those who have no occupational or private pension at all. According to a report in the Independent newspaper on the 28th of March 2018, as many as one in eight (12%) of all people retiring this year have no pension at all, other than their State Pension.
Little wonder, therefore, that several charities are already increasing their volume of concern about ongoing pensioner poverty and join those voices calling for everyone to start – and to continue – saving for their retirement.
Whatever your own current level of pension savings, you no doubt want to ensure that you make the very most of the arrangements you have already made. For thorough, well-informed and expert advice on your pension and retirement planning decisions, you may want to consult us here at Independent Pension Specialists.
Any data referred to in this article is correct as at the time of writing.