The long-term effects of the credit crunch are only now evident in pensions savings, says the Scottish Widows UK Pensions Report, with the Index at its lowest since 2006.

According to the sixth annual report, the Scottish Widows Pensions Index stands at 48 per cent this year – a figure down by six per cent on last year. The Average Savings Ratio has fallen to 9.2 per cent from 9.3 per cent, and 21 per cent of those who could and should be are not saving at all.

The gender gap has narrowed to nine per cent, but only 43 per cent of women are saving adequately, a drop of four per cent on last year’s results.

“The last two years have been tough on the economy, and we are finally seeing the effects trickling though to pensions savings,” explained Ian Naismith, head of pensions market development at Scottish Widows. “The previous three years saw a steady rise in the number of people saving adequately for retirement, but now we are seeing the full impact of the downturn on people’s retirement pots. While there are signs that the economy is recovering, the nation’s saving habits paint a very different story. There is still a great deal that needs to be done from both the Government and the industry to better encourage pensions savings for the long term, particularly in the current economic environment.”

The economic downturn has forced 41 per cent of people to save less for their pensions, which has come at a time when reliance on defined benefit (DB) schemes has dropped – 70 per cent of those with a DB scheme said it will provide their main income in retirement, down from 78 per cent last year.

“The last two years have been hard on everyone who is trying to save for their future. Whether it’s worries about job insecurities or the decline in DB schemes, those that could and should save need to try and make more of an effort to plan for their retirement years. The whole nation is feeling worse off than a year ago and this is really starting to take its toll on pensions savings, but instead of putting people off saving, the economic downturn should have been the trigger that everyone needed to save more,” added Naismith.

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