Public sector worker households are racing ahead of private sector workers and the self-employed when it comes to retirement adequacy, new analysis from Hargreaves Lansdown has shown.
Data from Hargreaves Lansdown’s Savings and Resilience Barometer shows 58% of public sector worker households are on track for an adequate retirement, compared to 43% of households overall.
Hargreaves Lansdown said the figure is significantly ahead of the 42% of private sector households who are currently on track for an adequate retirement, largely driven by the prevalence of final salary pension schemes in the public sector.
Meanwhile, the self-employed continue to struggle with just 36% on track with their retirement saving.
However, Hargreaves Lansdown said that when factoring in people’s wealth in its entirety, the picture of retirement resilience was more promising across all households.
Public sector workers still lead the charge, rising to 65% when including non-pension wealth, while large private company employees saw their resilience grow from 41% to 51% with wider savings. SME employees also saw their resilience jump, with the 42% of households on track using solely a pension measure jump to 51% once non-pension assets were included.
Clare Stinton, head of workplace saving analysis at Hargreaves Lansdown, said: “There’s still a long way to go, but there’s much that can be done to close the gap. We may well see the government revisit auto-enrolment contribution rates as part of its wider adequacy work.
“Rather than a rise in minimum contribution rates across the board we could for instance see more targeted measures – for instance encouraging employers to increase their own contributions for those employees able to boost theirs. We may also see more employers look to boost their employee benefits packages with wider savings products.
“Small steps – nudging up pension contributions, maximising what’s on offer from an employer, or delaying retirement – can also shift the dial significantly. A pension calculator can help you model the impact of changes, making the path forward clearer.”
Hargreaves Lansdown said that 47% of self-employed households are also on track for an adequate retirement income when taking wider assets into account.
The investment platform believes the Lifetime ISA could be of benefit to this group, particularly for basic rate taxpayers and has called for the government to expand the age eligibility beyond 40 and reduce the exit penalty to 20% to better support long-term financial security for the self-employed.
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