UK workers need to be saving £800 a month in order to enjoy a ‘moderate’ retirement, new figures from the Institute and Faculty of Actuaries have shown.
The calculation, using actuarial modelling, follows the launch of the Pensions & Lifetime Savings Association’s Retirement Living Standards, designed to help people picture what life in retirement will look like at three different levels; minimum, moderate and comfortable.
According to the IFoA, those who want to achieve the comfortable living standard of £33,000 will need to put aside £799 a month on average over their entire working life, more than twice the amount needed for moderate. Yet the survey found 70% of savers whose workplace pension is their main form of retirement saving, only contribute the minimum into their pension.
Mark Williams, Chair of the IFoA’s Pensions Board said: “Modern workplace pensions require people to take responsibility for their own retirement saving and planning, but clear and consistent information on how much they need to save can be hard to find. In our survey, almost a third of respondents said they did not know what constitutes a ‘good pension pot’.
“This IFoA research, connects the dots between actions taken now and impact on lifestyles in later life. But savers should not be left to navigate this alone. There is a shared responsibility between individuals, employers, the pensions industry and the Government to give individuals the best possible chance of having enough money in retirement, and our report provides specific recommendations for each of these groups”.
Acknowledging that these savings goals are high, and to many will appear daunting, Williams continued, “As actuaries, it is our role to ‘do the maths’ and we believe that it is in the public interest to demonstrate the potential scale of under-saving, and the impact it could have on people’s retirement prospects.
“We urge the Government to assess whether the current balance between the levels of employee and employer contribution is appropriate. Individuals alone should not be burdened with the responsibility of closing what could become a significant savings gap unless there is further policy reform.”
Steven Cameron, pensions director, Aegon, said the figures serve as a stark reminder that even saving for a moderate retirement takes careful planning.”
Steven Cameron, pensions director, Aegon, said the figures serve as a stark reminder that even saving for a moderate retirement takes careful planning.
“While auto enrolment has had a positive effect by raising the profile of retirement planning and encouraging millions of people to get into the savings habit, the current minimum contribution rates means many may be under-saving.
“The positive aspect of auto enrolment is that people are taking more interest in their retirement savings and are increasingly willing to think ahead and take action. So while the figures show the size of the challenge is considerable, especially at a time when people have competing priorities for their money, the good news is it can be done. The first step is working how much you have to save to maintain your desired standard of living in retirement. For many, this will reflect their pre-retirement standard of living.
“Looking at your workplace pension the most obvious way to boost your savings is by increasing your monthly contributions. It’s also worthwhile looking at the employer contributions and make the most of what they offer.”
Institute and Faculty of Actuaries report can be found HERE
PLSA report can be found HERE.
