Pension saving in the UK falls to lowest level for 12 years
Saturday, 31 December 2011 10:14
The proportion of UK employees in the private sector who are saving for a pension has dropped to the lowest level for more than ten years new figures from the Department of Work and Pensions (DWP) show.
Just 38 per cent of workers are actively saving for retirement at the moment revealing the increased pressure on household finances over the past few years of the economic downturn as a result of high inflation and low wage rises. This compares to 46 per cent of workers saving into a private pension in 1999.
Part of the reason for the lower level of pension saving is likely to be the reduced rates of return from annuities.
The figures show that the proposed changes to the pension system planned by the government through auto-enrolment, where private companies have to offer a pension scheme to which both employers and employees contribute cannot come soon enough if UK workers are to avoid having to work well beyond the pension age to support themselves.
Under auto-enrolment which is expected to be introduced in October 2012, all employees aged 22 and above earning more than £7,475 will be eligible for auto-enrolment whereby most firms will automatically enrol employees in a workplace pension scheme.
The figures from DWP show that just 11.6 million out of 30.4 million people who are working are currently saving for their retirement. The fall in pension saving is most prevalent amongst men where it fell from 52 to 39 per cent and the under 40’s where the drop was from 43 to just 31 per cent.
Government Pensions Minister, Steve Webb admitted that the findings from his own department were worrying.
He said: “These are alarming figures and they underscore exactly why our pension reforms will be so vital.
“With fewer people saving into a pension, lower annuity rates and an average of 23 years in retirement, many people could face a poorer future in their later lives.”
Joanne Segars, Chief Executive of the National Association of Pension Funds, said: “These figures are dreadful and should be keeping the Government awake at night.
“They prove that the UK simply isn’t saving enough and that, sadly, millions of people are on course for an old age ruled by poverty.”
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