Britain’s workers not saving enough for retirement

The Organisation for Economic Co-operation and Development (OECD) recommends that savers need about 70% of their final salary to fund a financially comfortable retirement, but the World Economic Forum (WEF) is concerned that many people are not saving enough to achieve this level of pension income.

The British state pension funds about 38% of the average salary, leaving savers to make up the extra 32% with workplace and private pensions in order to achieve the 70% figure recommended by the OCED.

The World Economic Forum (WEF) noted that life expectancy has increased rapidly since the 1950s. If life expectancy continues to grow at the current rate, babies born today can expect to live for over a century. This means that they need a substantial amount of pension savings to cover a long retirement.

It is projected that 26.2% of the British population will be over the age of 65 by 2066. Last year, only 18% of Britons were over 65.

Although many workers have been auto-enrolled in workplace pensions schemes, many are contributing only the minimum amount required by the pension regulations. The WEF says that workers should be saving between 10% and 15% of their salary in order to achieve a reasonable pension income, and comments that average savings rates are:

“…not aligned with individuals’ expectations for retirement income – putting at risk the credibility of the whole pension system.”

At Endeavour Financial Planning, we stress the importance of careful retirement planning to avoid unpleasant surprises after retirement.