A new report paints a bleak picture for the retirement prospects of millions of British workers. According to analysis by the Pensions and Lifetime Savings Association, nearly 75% of employees are not on course to achieve a ‘moderate’ standard of living in retirement. That means most will face a squeeze on essentials like housing costs, food bills and heating.
The findings come amid a cost of living crisis that has already stretched household budgets to breaking point. The standard for a ‘moderate’ retirement income is set at about £23,300 a year for a single person. To reach that, the report says workers need to be saving at least 12% of their earnings into a pension pot.
But with wages stagnant and many struggling with higher prices, that target is way beyond reach for the vast majority. The report also highlights a worrying regional disparity. In the North West, where the average wage is lower and many rely on defined benefit schemes that have been closed to new entrants, the savings gap is especially stark.
Paul Johnson, director of the Institute for Fiscal Studies, said the findings were ‘deeply concerning’ and called for a shift in thinking. ‘Auto-enrolment has been a success, but we need to go further. The minimum contribution level is too low and many people are simply not saving enough.
The government should consider raising the default rate and making it compulsory for employers to match contributions above the current 3% floor.’ The Trades Union Congress echoed the sentiment, with general secretary Frances O’Grady saying the report ‘shows that too many people in Britain are facing a retirement of poverty. We need a bigger state pension and stronger workplace pensions, not more corporate tax cuts.
’ Yet the government has been slow to act. A spokesperson for the Department for Work and Pensions said they were ‘committed to helping people save for retirement’ but offered no immediate policy response. For the millions of workers in their 30s and 40s, this report is a stark warning.
Without action, a comfortable retirement is a distant dream for the majority.
