Nearly 14 million face retirement income shortfall, report says

pension

Nearly 14 million workers face a shortfall in their retirement income, according to analysis by a pension industry body.

The Pensions and Lifetime Savings Association (PLSA) said more than half of the 25.5 million people in employment in Britain were not putting enough aside, reports Sky News.

It is calling for workplace pensions to see minimum contribution rates lifted to at least 12% of salary.

This contribution, including a portion paid by employers, is currently set at 2% and due to rise to 8% by 2019.

The roll-out in recent years of auto-enrolment into workplace pensions means that employees have to actively opt out if they do not want to put aside money.

Graham Vidler, the PLSA’s director of external affairs, said this policy was “set to deliver a tangible improvement in the retirement incomes of millions of people” but there was more to do.

The report looked at an adequate retirement income defined as 67% of the sum earned before giving up work.

For someone earning a typical income of £27,456 this equates to retirement income of £18,395.

According to the PLSA report, 13.6 million people are at risk of not achieving this rate.

It said “millennials” aged between 22 and 34 years old faced new challenges with the high cost of housing and accommodation as well as student debt.

Meanwhile, those aged between 35 and 54 years old are currently making pension contributions which are too low to make up for their lack of saving earlier in their lives.

Baby boomers, aged 55 to 64, faced a mixed situation, the report said, with some having built up very good retirement incomes from final salary pensions, and others having quite poor retirement income prospects.

Even though some may now have been automatically enrolled into a workplace pension, many in this group will only have 10 years or less left of their working lives to turn their situation around.

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