We're not saving enough for retirement
Whichever survey you care to delve into, the evidence is overwhelming. In credit crunch Great Britain of 2013, most of us are not saving enough for our retirement.
We're quietly edging towards old age financially underprepared and far too reliant on a state pension to provide us with all our retirement income needs. Without being over-dramatic, we've fallen out of love with pensions.
Recent research from two of the country's most respected pension providers highlights the impoverished state of pension saving in this country.
The first, from Prudential, shows that one in seven people retiring this year will do so with no private pension provision (from an employer, for example) of their own. In other words, they will be solely reliant upon the state (whose finances are creaking at the seams) for income in retirement.
Currently, the maximum basic state pension is £110.15 a week although pension credit could top this up to £145.40. Worryingly, Prudential's findings also indicate that many retirees over-estimate how much state pension they will receive.
Being optimistic, I could draw comfort from the fact that last year, one in six people retired dependent upon the state pension, while in 2011 one in five retired with nothing other than the state pension to rely on. So the figures for 2013 are an improvement on the previous two years.
But I'm clutching at straws, especially when Prudential's research also reveals that one in five workers who retire this year will do so with annual retirement income below the poverty line of £8,254.
As Vince Smith-Hughes, head of pensions business development at Prudential, says: "Over the past six years, the average retiree has gradually become more dependent on the state pension as the proportion of their income from other sources falls. There are two worrying constants to the figures.
"The number of people who will struggle in retirement and the fact that a quarter of retirees every year significantly overestimate how much the state pension pays."
The second report, from Scottish Widows, confirms the Prudential's findings: 55% of people are not saving enough for retirement; 20% are not saving a single penny; while more people are entering retirement underprepared and with credit commitments (a mortgage, for example) to honour.
All very gloomy. But rather than wallow in pensions despair, we should use the findings of both reports as a rallying call. Most of us need to save more, and the earlier we get saving
the better. Auto-enrolment should help.
Between now and 2017, most workers will be automatically enrolled into a pension by their employer as part of a government initiative to get workers to take responsibility for building their own retirement funds.
Although the minimum contributions involved are low (8% from 2018, comprising a mix of employee and employer contributions plus tax relief from the government), auto-enrolment will engage many workers with pensions for the very first time.
Of course, auto-enrolment is still only in its infancy, but the early signs are encouraging. According to pensions consultant Towers Watson, more than 90% of employees are agreeing to save into a company pension rather than opt out, as is their right.
Major pensions provider Legal & General is similarly enthused. Like Towers Watson, it says opt-out rates are under 10% – much better than the 35% it had expected.
Yet while auto-enrolment will help widen the pension savings habit, it won't necessarily deepen it. For that to happen, all of us need to take greater responsibility for our pensions and investments.That means checking that our pensions (and tax-friendly ISAs) are invested wisely and in plans where charges do not erode all the benefits.
Pensions calculators now abound that allow you to work out how much you should be saving and when you might be able to afford to retire. Punch your numbers into any pensions calculator and see what it presents you with.
I imagine you will be horrified by the results. I was. So get saving.
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.