Millions face ‘basic’ retirement by ‘wrongly’ believing they are contributing enough

Millions of people across the UK “wrongly” believe they are saving enough for retirement because they are contributing the amount set out by auto-enrolment regulations, according to B&CE, provider of The People’s Pension.

Its new report, Pensions Adequacy: A Pensions Saver’s Perspective, showed that more than half (57 per cent) of auto-enrolment pension savers are making the minimum employee contribution, and 65 per cent are receiving the minimum contribution from their employers.

The research found that, in many cases, auto-enrolment contributions are people’s primary source of saving.

The minimum contribution rate of 8 per cent of band earnings is likely to only provide a ‘basic’ level of retirement according to the Pension and Lifetime Savings Association’s Retirement Living Standards, which indicate £10,900 a year is enough for a basic level of retirement, B&CE noted.

It found that 7 per cent of savers were aware they are only saving enough for ‘basic’ retirement; the rest foresee a ‘moderate’ (£20,800) or ‘comfortable’ (£33,600) retirement.

The research discovered that 40 per cent believed that because the contribution rates have been set by the government, they represented an adequate amount to be saved.

B&CE also revealed that 43 per cent of all savers had not considered paying more into their pensions, 46 per cent did not know they were allowed to pay in more than the minimum and 64 per cent of people had less than £10,000 in additional savings.

B&CE director of policy, Phil Brown, commented: “For most workers across the UK, saving something for retirement is better than saving nothing at all – particularly considering your employer also contributes.

“But we can’t escape the fact that millions of hardworking people are not saving enough for the level of retirement they expect.

“Affordability obviously plays a role in this, but the research is clear that in most cases, people believe that because they’re saving what they’ve been told to by those who run the country, they’re saving enough.”

Following the publication of the research, B&CE called on the government to set out plans for a review of the minimum contributions required for auto-enrolment and to outline a timeline for implementing the recommendations of the 2017 automatic enrolment review, once economic circumstances allow, which call for workers aged 18 and over to be covered by auto-enrolment, and for contributions to count from the first pound earned.

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