More than half of Brits (51%) are failing to save enough to enjoy a ‘moderate’ standard of living in retirement*, new DWP analysis shows.
Meanwhile, almost 9-in-10 people will fail to achieve a ‘comfortable’ retirement living standard, the government warns.
Automatic enrolment has successfully increased the number of people saving something for their later years, but minimum contributions remain low.
Both this government and whoever wins the next general election will need to set a clear path for increasing retirement savings levels and tackling chronic undersaving among self-employed workers.
Tom Selby, head of retirement policy at AJ Bell, comments: “The time has come for politicians and the pensions industry to stop patting themselves on the back about the success of automatic enrolment and start tackling the real challenge of pensions adequacy.
“The grim reality is that only half of Brits will enjoy a ‘moderate’ standard of living in retirement on current projections, while those saving enough for a ‘comfortable’ retirement will be a slim minority of the population.
“With living costs surging for millions of households, now is not the time to hike people’s auto-enrolment pension contributions. But that does not mean policymakers should not set out a long-term trajectory to get people saving more.
“There are various interesting ideas out there, including ‘save more tomorrow’, where contributions rise automatically in line with pay increases, and exploring ways to link contribution rises to certain life events. But the longer we delay addressing this pensions adequacy challenge, the bigger it becomes.
“This must include assessing how those excluded from auto-enrolment, including millions of self-employed workers, can be brought into the pensions system. Failure to do this will risk creating a two-tier retirement system, with the self-employed left relying on the state pension and not much else in their later years.
“Today’s analysis also gives valuable context to the debate around retirement savings incentives. The focus must remain on encouraging people to save more for the future, rather than hacking back pension tax relief at every opportunity.”
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