Home Business News Nine million UK mid-life employees flying blind into retirement

Nine million UK mid-life employees flying blind into retirement

by LLB Editor
23rd Aug 19 7:57 am

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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