New figures from Scottish Widows predict combined state and private pension income will average £13,000 a year, over £11,000 short of what people target for their retirement income.
According to the survey, many over-estimate the amount they would receive from their retirement savings, and less than half were saving enough to generate the pension they desired. The combination of state pension (currently £107.45 a week) and private pension was not enough to meet the target average income of £24,500 the people felt was enough to be comfortable in retirement.
With one in five workers saving nothing at all and many more saving insufficient amounts, the survey exposed an alarming pensions gap.
The survey also found that 41% would like to retire by the time they reach 60, despite government moves to increase state pension age, from 65 to 66 by 2016 and 66 by 2020. Only one in nine respondents wanted to carry on working until they were 70.
Ian Na at Scottish Widows, said: ‘These are alarming findings as UK pension provision has hit an all time low. People are saving less for old age yet their expectations remain high as the majority fail to recognise the harsh reality of retirement.
‘With an aging population, and ongoing economic difficulties, it has never been clearer that we need to do more to shift people quickly from their unrealistic ‘rose-tinted’ expectations of retirement. They must either increase their savings substantially or change their expectations of when they might retire and how much income they will receive.’
From 2012, employees will start to be enrolled into a pension scheme automatically. This is a deliberate attempt to overcome inertia and a tendency to put off pension saving until it is too late to build up an adequate pension ‘pot’.
Which? pensions expert, Ian Robinson said: ‘The survey findings are a wake up call for the future. Auto-enrolment should help to remedy the situation, but if opt-out rates are too high it may prove disappointing. The benefits of regular pension saving, started early in your working life, need to be made clearer.
‘Tax incentives and the employer’s contribution make it one of the best deals on offer, even if current defined contribution (money purchase) schemes fall short of their defined benefit (DB) predecessors and have a far less certain outcome.’