Millions of mid-life UK employees are sleep walking into retirement, according to new research from Aviva UK.
The study, which looked in to mid-life2 employees’ financial preparedness for later life, revealed 64% of employees aged 45 and over, the equivalent to nearly nine million people do not know how much they will need to save to afford a comfortable retirement
In addition, over five million mid-life employees (37%) do not know how much is already saved in their pension. Question marks also hang over the state pension with two in five (43%) respondents unaware of how much support they will receive from government. A further 26% do not know at what age they’ll be eligible for the state pension.
With the full new state pension currently valued at £168.80 per week, this adds up to a retirement income of £8,777.60 per year.
Table 1: Percentage of employees aged 45+ that do not know the following information
| % of UK employees aged 45+ | Number of UK employees aged 45+ | |
| The age at which I will qualify for the state pension | 26% | 3.6m |
| How many pension pots I have | 35% | 4.9m |
| How much I have currently saved in my private pension(s), if anything | 37% | 5.1m |
| What type of private pension scheme I have | 37% | 5.1m |
| How much my employer contributes towards my current private pension | 36% | 5m |
| The state pension provision | 43% | 6m |
| What the pension freedoms mean for me | 62% | 8.6m |
| How much I need to save before I can retire comfortably with the lifestyle I want | 64% | 8.9m |
Source: Aviva UK, 2019
Most employees (62%) aged 45+ do not know what the pension freedoms mean for them, while 37% do not know what type of pension scheme they have, for example whether it’s a defined contribution or defined benefit scheme.
Never too late to save
However, the analysis also highlights it is never too late to save. Based on the average UK salary of £28,0004, Aviva calculates that an employee aged 45 today, with no savings to date could build a pension pot of £56,100 by the time they reach 65, based on the current minimum employee and employer pension contributions under auto-enrolment alone (a combined 8% of annual pensionable earnings).
Table 2: Projected value of savings for average employee by retirement age of 655
| Starting age | Amount saved by employee (5% contribution of annual pensionable earnings) | Amount contributed by employer (3% contribution of annual pensionable earnings) | Projected value of pension savings by 65 years old (projected investment growth of 2.4%) |
| 45 | £21,840 | £13,200 | £56,100 |
| 50 | £16,380 | £9,900 | £39,600 |
| 55 | £10,920 | £6,600 | £25,500 |
| 60 | £5,460 | £3,300 | £13,600 |
Source: Aviva UK, 2019
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