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This UK demographic faces difficult financial future

8 May 2017

Kate Smith, head of pensions at Aegon comments on the Resolution Foundation report on living standards in the UK, which examines the pay squeeze which has seen income growth slow substantially in 2016-17, with typical income just 1.2 per cent higher than the year before. Rising inflation and slowing employment growth is already leading to slower household income growth, which has left many middle income households struggling to save for retirement.

Smith says: “With low levels of retirement savings and a heavy reliance on the state pension this demographic is set to face a difficult financial future.

Traditional retirement is now a thing of the past and as healthy life expectancy increases, many now expect to continue working on into, and beyond retirement, some out of choice, others out of financial necessity.

Employers can no longer force employees to retire allowing people not only to continue earning well into their 60s, but also to continue to build up pension savings.

The message couldn’t be clearer for future generations: start saving early. Putting away even a modest amount can really add up over the years, benefiting from the compounding effect of investment growth.

Auto-enrolment, which has successfully started an extra 7.5 million people on their retirement saving journey, will help but there remains a portion of the population who either feel unable or unwilling to save for retirement, and our own recent research found that one in seven people are approaching retirement without a private or workplace pension.

It’s crucial that government and industry work together to reach those people and persuade them of the need to save.

The review of auto-enrolment is an opportunity to extend pension savings to more people, and drive up contributions.”

 

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