Pension savings need to increase

The average amount being put into a workplace pension has fallen to an all-time low. Recent figures from the Department for Work and Pensions (DWP) revealed that the annual amount being put aside by eligible savers has fallen from £7,326 in April 2012 to £5,110 in April 2017. According to experts these figures have come about due to auto-enrolment, with many employees on low incomes paying the minimum amount into their pension pots. Although the headline may seem like bad news it’s worth noting that auto-enrolment has encouraged far more people to save for retirement with 84% of people saving into a workplace pension in 2017 up 7% from the previous year.[1] It’s also encouraging that auto-enrolment has increased the number of young people who are saving as modest amounts saved early and continuously really do add up.

How much should employees be saving?

With the average life expectancy at 81 and many people living much longer than that, those that choose to retire aged 65 or earlier can expect to be living off their pension for multiple decades!   On top of this an increasing number of people do not own properties by the time they retire, meaning that they’ll have to pay very expensive rent prices out of their pension savings. While the government increasing minimum contributions to a total of 8% by 2019 is a good start to helping people live more comfortably in retirement, there is still a risk that this will not be enough. It is believed that the minimum level needs to increase to 12 % of salary over the course of the 2020s if retirees are to be financially secure.

How financial advice can help?

A 2016 report from unbiased.co.uk found that those who had taken advice when planning their retirement had on average £48,279 more in their pension pot (after tax relief and interest) than those in a similar income bracket who did not take advice![2] We believe financial advice is critical because these decisions are simply too important to get wrong.  Aspira’s individual advice can cover affordability of pension contributions, attitude to investment risk, targeting retirement income, reviewing previous pensions and looking at savings and protection needs. This advice can be delivered in the workplace or remotely, and with our Personal Finance Portal members' sensitive and important documents are secure and easily accessible 24 hours a day

 

[1] Workplace pensions savings fall to all-time low, www.hrmagazine.co.uk, viewed 25/06/18

[2] The Cost of Advice, www.unbiased.co.uk, viewed 16/06/16

 

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