People in the UK now expect roughly a third (32 per cent) of their retirement income to be funded by workplace savings, a new survey has found.
The poll by insurer Aegon also revealed that people in the UK were more likely to rely on their workplace pension pot than those in other countries. The average proportion of retirement income expected to come from workplace saving plans across more than 15,000 people surveyed from 15 countries was just a quarter (24 per cent).
Meanwhile, Brits expected 42 per cent of their income in their golden years to come from the government and the remaining 26 per cent to come from their own savings and investments.
Those aged 18 to 24 in the UK expected a much smaller proportion (35 per cent) of their retirement income to come from government funding compared with those who had already reached pensionable age (50 per cent). However, younger people still expected to be able to retire at 65 on average, despite the Department for Work and Pensions’ announcement last month that it would be accelerating the rise of the state pension age.
“Retirement has long been characterised as a ‘three pillar’ model with government benefits, employer pensions and personal savings all supporting individuals when they stop working and no longer have earnings from employment,” said Steven Cameron, Aegon UK’s pensions director. “There are significant global differences in the extent to which people expect their retirement income to come from each of these pillars, depending on the retirement system in the country where they live.”
Meanwhile, a separate survey published today by LifeSight, Willis Towers Watson’s UK defined contribution master trust, found that 97 per cent of more than 100 UK companies were struggling to motivate their employees to save into their pension plan.
Putting money away for either a house or holiday was the top reason given for employees not saving more for their retirement, recognised by more than half (56 per cent) of the employers surveyed. A fifth (20 per cent) blamed the complexity and lack of understanding of pension products for putting off employees, while 17 per cent thought it was an affordability issue.
“This is a worrying, but unsurprising, finding,” said David Bird, head of proposition development at LifeSight. “Employees focusing on short-term savings is a common challenge. Personalised pensions communication could be an important way of addressing inertia in pension savings.”
More than half (57 per cent) of employers surveyed by LifeSight admitted that their pensions communications were not tailored to individual employees.
Meanwhile, the latest figures from the Pension Protection Fund’s 7800 index, which tracks the funding status of the UK’s defined benefit – also known as final salary – pension schemes, revealed that there were 4,156 schemes in deficit compared with 1,638 schemes in surplus at the end of last month.
However, the aggregate deficit across the 5,794 schemes tracked had fallen to £180.1bn at the end of July, down from £186.2bn at the end of June.