The latest Scottish Widows Retirement Report has revealed that retirement saving in the UK has reached the highest level ever recorded, with 56% of the population now saving adequately.
The new research shows that outside of pension savings, people are saving on average £142 a month towards their retirement, rising 8% from £130 last year. 19% expect to save more over the next 12 months and 40% feel positive about their long-term financial situation, up from 37% last year.
For the first time in 10 years, the average proportion of earnings being put away each month towards retirement has reached the 12% recommended by Scottish Widows – more than twice the level in 2006 (6%) and a third higher than in 2013 (9%).
Despite the recent raft of reforms designed to shift retirement planning higher up the nation’s financial agenda, there has been no improvement in the number of non-savers since last year, with one in five people (20%) – around 6.2million – not saving at all for retirement, the same level as recorded in 2009. This is the equivalent of double the population of Wales. A similar proportion of people have no savings or investments whatsoever, increasing from 17% last year to 19%.
The research found that the savings gap is widening among the self-employed and those working for small businesses, with 39% of self-employed people and 30% working in a small business not saving anything at all, up significantly from 23% last year.
Meanwhile 43% of those with annual personal incomes under £10,000 are failing to save anything for retirement, compared to 24% of those earning up to £30,000 and just 9% of those earning more than £30,000 a year.
The study of 5,000 UK adults highlighted a clear disparity between expectations of retirement income and the reality of how far savings will stretch. Whilst the average income Britons aged 30-65 believe they would need to feel comfortable in retirement is £23,469, people saving at the current average level can expect an annual income of £15,600 in retirement[6] – an annual shortfall of over £7,800.
Ian Naismith of Scottish Widows said: “Since we began our research over a decade ago, a record proportion of people are now saving adequately for the future, showing that the unprecedented changes in the pensions industry have gone some way to engage the nation with retirement saving.
“Despite the positive signs, causes for concern remain, as savings levels among the self-employed and those working for small employers declined this year. The final years of rolling out automatic enrolment will be crucial as it reaches those who have previously not had the opportunity to participate in a workplace pension.
“Our research shows that confusion remains around how actions today translate into money tomorrow, with many people retaining unrealistic expectations about what their income in retirement might be. Both the industry and the Government need to continue working together to help people understand the living standard their savings might produce in real and tangible terms. Having a plan in place, starting to save earlier and putting aside more for later life will mean people will be better prepared to close the retirement aspiration gap.”
