Just nine per cent of people in the South-East are on track for retirement with unrealistic retirement income expectations a major concern, according to the third UK Readiness Report from Aegon.
New research from Aegon UK reveals that encouragingly, this is a slight increase from the eight per cent in April 2014 and is higher than the national average of just seven per cent.
Aegon’s third UK Readiness Report – the latest in a series of reports that looks at attitudes towards retirement, has a particular focus on levels of engagement with workplace pensions.
It finds that the South-East’s Readiness score has actually fallen over 12 months from 53 to 49. People still hope to retire on £52,000 - despite the fact that this would require a saving pot of more than £1m, a sum higher than the new pension lifetime allowance.
The lack of preparation for retirement should be set against the backdrop of large scale change in the pensions industry. More than five million people have now been auto-enrolled into a pension scheme by their employer in an attempt to improve retirement readiness.
However, 39 per cent of employees in the South-East don’t know how much of their salary they’re contributing to their pension pot, and 55 per cent say they have no idea how much their employer is contributing. On top of this, nearly half (48 per cent) of the South-East’s workers have no idea how much they have saved into their company pension so far. Thirty-four per cent of those in employment don’t even know whether they’re eligible to be auto-enrolled into a company pension.
Just under half (46 per cent) of respondents in the South-East have never done anything to review their retirement plans, and 49 per cent have never checked the performance of their retirement savings. It is therefore perhaps no surprise that nearly two-thirds (65 per cent) do not feel confident about being able to retire at their target retirement age.
There is, however, positive sentiment about the idea of having a workplace pension and the desire to save for the future. Fifty-seven per cent plan to rely on their workplace pension as their main source of post-retirement income, and just six per cent said they’d leave the auto-enrolment scheme when the minimum contributions rise to five per cent in 2018.
In fact, nearly a quarter (24 per cent) said they would go so far as to increase the amount they saved beyond the minimum requirement.
David Beattie, Managing Director, Aegon UK Direct said: “It is deeply worrying that as a nation we’re still failing to prepare for our futures, despite the big changes made to pensions in recent years. We have a new government, and with this, the opportunity to ensure the pension reform of the last parliament is implemented successfully. The focus has been primarily on giving those approaching retirement more control of their savings, something that we wholeheartedly support. But it is time for a shift in emphasis from both government and industry. We must now focus on the savers, and do more to help them save for the retirement they want.
“There’s a huge disconnect between the amount people have saved and the retirement income they want in retirement. Most people want an income which would require more than £1m of savings. How close are they to that? With the lifetime allowance due to fall to £1m, unless individuals also have substantial non-pension savings or defined benefit pensions, £50,000 isn’t just unrealistic – it’s more than the Government will allow!
“We now have online tools that could, and should help people to engage in a simple, but effective way. There is a clear appetite for digital and mobile services; 61% of people want to manage their pension online, but currently just 23 per cent do so.”