One in five Brits has no pension
UK pension savings have hit an all-time low with only 46% of people saving enough for their retirement, according to a report from Scottish Widows.
In addition, a fifth of all adults aged between 30 and the state pension age who are earning more than £10,000 don't have any kind of private pension in place – up 20% compared to a year ago.
Lack of disposable income is one of the most common reason people aren't saving enough, with 73% saying they are putting money towards other things such as paying off debts.
Of those people who are saving some money towards retirement, many have unrealistic expectations about how much they'll actually have to live off. The average amount people want to retire with is £24,500 a year - this is an increase of £200 since a year ago.
But the average pension pot of £150,000, based on this year's low savings levels, means someone retiring at 65 would have £5,700 per year, which rises to £13,000 with state pension contributions.
"People are saving less for old age yet their expectations remain high as the majority fail to recognise the harsh reality of retirement," says Ian Naismith, spokesperson for Scottish Widows.
"Some may think that they will be able to fall back on the state pension, property or a partner's pension and while these options may provide some level of support, saving nothing for retirement could be a fast track to financial problems and serve poverty in later life," he adds.
In October, the government is rolling out a system of auto enrolment of employees into a private pension. It will require all employers to enroll their staff into workplace schemes if they are not already in them.
"Auto enrolment presents a once in a lifetime opportunity to reverse these trends. But for this to be successful we need a compelling government communications campaign to make clear in simple and understandable terms the need to save for retirement," Naismith adds.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.