Just when you thought the gloom was starting to lift from the pensions sector, new research from AXA shows that pensioner poverty is set to rise, with 64 per cent of UK workers expecting to rely on the state pension.

AXA's research looks at the UK's situation in relation to that of the rest of the G7, and found that the UK comes out bottom of the pile when it comes to state pension provision. The state pension is worth just 31 per cent of the average earnings in the UK, while the Italians look forward to a state pension worth 68 per cent of average earnings. This comes as more and more UK residents move away from occupational pension schemes.

"There has to be a concerted, coordinated effort to make sure that people are adequately provided for, or we will inevitably be faced with a pensions dark age," commented Steve Folkard, head of savings and pensions policy at AXA.

The number of active members in occupational schemes fell to 8.8 million members in 2007, from 10.7 million in 1991. Personal Accounts, due for implementation from 2012, is expected to alleviate this problem, but AXA said there is still a large amount of uncertainty around their implementation and potential impact. The Pensions Policy Institute (PPI) estimates that the trend for defined benefit (DB) switching to defined contribution (DC) will mean an additional ten million savers in DC pensions by 2020. However, the research shows that only 19 per cent of people are likely to take part in the automatically enrolled scheme.

"The erosion of the once sound company pensions infrastructure in the UK, which supported the retirement needs of the working population over much of the 20th century presents a future government with a massive challenge. Pensioner poverty is set to grow dramatically over the coming years and current reform measures will take years to implement," added Folkard.

He said AXA has two major concerns - the continuation of means-tested benefits and how the lack of clarity surrounding what a person will receive impacts negatively on the willingness to save, and that auto-enrolment for existing schemes must be brought forward to increase take-up amongst those existing good schemes.
"Our research shows that 64 per cent of people are planning to support themselves in retirement on the state pension and as such AXA is calling for more government messaging around the importance of pension saving. This should encourage individuals to take more personal responsibility in saving for an adequate level of retirement provision.

"We risk heading past the point of no return for many people in this country who may be left living on the very minimum in retirement."

As part of AXA's 'My Budget Day' campaign, designed to encourage people to take better control of their finances, AXA will launch a UK-wide 'Living on a State Pension' campaign from 2 November.

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