A fifth of non-retirees say they are not paying into a pension

A fifth (20 per cent) of non-retired workers in the UK say that they are not currently paying into a pension, according to research from the Pensions and Lifetime Savings Association (PLSA).

The findings, published to coincide with Pensions Awareness Week, showed that 42 per cent of non-retirees had a workplace defined contribution pension, which PLSA highlighted as demonstration of the success of auto-enrolment, while 17 per cent held a defined benefit pension and 16 per cent had a personal pension.

However, the survey also revealed that despite the success of auto-enrolment, 25 per cent of everyone surveyed did not have a pension, while five per cent were unsure, and a “concerning” 20 per cent of non-retirees stated that they are not paying into any pension.

In addition to this, the survey found that over half (56 per cent) of savers with a pension are worried they are not saving enough for retirement, while just over a fifth (21 per cent) are confident they are saving enough to fund the lifestyle they want when they stop working.

In particular, around two-fifths (42 per cent) of respondents expected to be able to achieve a minimum lifestyle as defined by the PLSA Retirement Living Standards, while over a quarter (28 per cent) expect a moderate lifestyle, and just 16 per cent expect to achieve a comfortable retirement.

Older savers were more likely to expect a moderate or basic lifestyle in retirement, as 71 per cent of over-65 year olds were anticipating a minimum level, while 40 per cent were expecting a moderate lifestyle and 14 per cent were expecting a comfortable level.

In contrast, 40 per cent of 18-34 year olds were expecting a minimum level, while 32 per cent are anticipating a moderate level and 23 per cent believe a comfortable level to be achievable.

However, 75 per cent of non-retirees stated that they believe they could save extra into their pension to boost their pension savings, with the average additional contribution being £68 per month.

Around 17 per cent stated that they could only pay in less than £25, while 25 per cent said they could pay in £25 to £50 in additional contributions, and a further quarter (25 per cent) said they could pay in between £51 and £200 in additional contributions.

UK savers remained “in the dark” about pension saving basics, according to the PLSA, with the majority (78 per cent) of the public unaware how much new retirees with a full state pension will receive.

The research highlighted concerns over the level of knowledge held by non-retirees, revealing that nearly half (46 per cent) are unaware how much per year retirees receive in state pension.

In contrast, just over half (53 per cent) of savers knew that retirees receive around £9,000 per year from the state pension, with 70 per cent of those aged 55 and over able to correctly identify this, compared to 40 per cent of those 18-34.

This is despite just over a third (36 per cent) of savers stating that they expect to rely on the state pension as their main source of income in retirement, increasing to 49 per cent amongst 55-64 year olds.

However, there was a broader uncertainty around pensions and retirement income, as 18 per cent were unsure what they will rely on in retirement.

The survey also revealed a lack of knowledge around decumulation, as nearly a third (32 per cent) of non-retirees said they did not know they will have to make a choice from a range of different options as to how they want to take their money at retirement.

Furthermore, just over a quarter (29 per cent) stated that they know they need to choose and fully understand their options, while 39 per cent said they know they need to choose a retirement option at retirement but say they don’t fully understand the options.

Considering this, the PLSA highlighted the fact that most non-retirees surveyed (93 per cent) would get advice when it comes to making their pension income decisions as “encouraging”, with a further 50 per cent stating that they would go to Pension Wise.

Despite this, only a third (33 per cent) of respondents expected to use a financial adviser, while a quarter (27 per cent) would use government or consumer website, 26 per cent would look to their pension scheme, and 24 per cent would look to a private sector money advice website.

Additionally, 17 per cent stated that they would go to their employer, and just under a third (31 per cent) would seek advice from family or a friend.

Commenting on the findings, PLSA director of policy and advocacy, Nigel Peaple, said that it was "striking" that so many people do not yet know the basic elements of pension saving, such as how much the state pension is worth and how much they need to save.

“This Pensions Awareness Week, we want savers up and down the UK to take stock of their pension saving and to check that they are saving the right amount to achieve the retirement lifestyle they want," he continued.

“It’s encouraging that three quarters of respondents believe they can afford to save more into their workplace pension. People often do not know how to make extra contributions. Your pension scheme or provider can help with this.

“It’s never too late to start thinking about your pension. Using the wide variety of tools available – including the PLSA’s Retirement Living Standards and MoneyHelper’s Pension Calculator – savers can gain a better understanding of what types of lifestyles they can afford to live in retirement given their current saving habits.”

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