- Almost a quarter (24%) of those saving into a workplace pension say they don’t know how much they are contributing towards their pension, but nearly a third (31%) of those savers think they’ll have a comfortable or secure retirement.
- Over a quarter (27%) say they are only paying the minimum 1% contribution.
- More than half (54%) admit they don’t know what size pension pot they may have at retirement.
Auto enrolled savers are being lulled into a false sense of security when it comes to their retirement savings with over half (56%) of those with workplace pensions relying on it as their only form of saving for retirement.
According to research from workplace pension provider NOW: Pensions, over a quarter (27%) say they are only paying the minimum 1% contribution, which equates to a saving of just £400 a year based on the average UK salary of £27,600, and including the 1% employer contribution. Over a third (39%) of these savers expect a comfortable or secure retirement including holidays and going to restaurants.
Almost a quarter (24%) say they don’t know how much they are contributing towards their pension, and over a third (31%) of those expect their retirement to be driving a nice car and treating their family.
The research also revealed a wide variation in the size of pension pots that savers expect to build up by the time they retire.
Worryingly, over a quarter expect to save just £60,000 or less, yet still expect their retirement to be comfortable or secure.
It will be five years since employers first began automatically enrolling their employees into workplace pensions on 1 October 2017. But while a huge amount has been achieved, there is a danger that savers think they are doing enough by just saving the minimum into their pension pots.
On average, those with a workplace pension expect to save £150,477. A 65-year-old retiring today with a pension pot of £150,447 would receive an income of just £7,537 per year, which is just £628 per month.*
Perceptions also differ between genders, with men expecting nearly twice as much as women in retirement at £184,000 and women at £102,000. Conversely, more than (54%) admit they don’t know what size pension pot they may have at retirement.
However, the situation is not all doom and gloom. Of 2,007 UK employees aged 22 to 66 surveyed over a third (38%) say they were not saving for retirement before they were auto enrolled and over two thirds (68%) of all those surveyed say that saving into a pension is ‘extremely’ or ‘very’ important.
Adrian Boulding, Director of Policy at NOW: Pensions said: “Auto enrolment is delivering on its objective of getting people saving – particularly those who’ve never saved into a pension before.
“But, with so many savers relying on their workplace pension as their only form of retirement saving, it’s imperative that they aren’t given a false sense of retirement security. It’s just not realistic to think that contributions of £400 a year will lead to retirement pots averaging £150,000.
“For the majority of auto enrolled savers, the reality is that minimum contributions won’t be sufficient for a comfortable or secure retirement. For auto enrolment to live up to savers’ expectations, government need to give careful consideration to increasing minimum contributions. If they don’t take action, they run the risk of millions of disappointed retirees.”
Tim Sharp, Policy Officer at the TUC said: “Automatic enrolment has been a huge success. Millions more people now have workplace pensions.
“But it would be a betrayal of these savers if they got to retirement to discover they faced a huge drop in their standard of living.
“We need to act now to begin raising contribution rates to a decent level.”
Notes to editors
After we had asked people to predict the size of their pension pot, we then asked them whether they thought that would provide a comfortable retirement
The following table illustrates the disconnect between how big savers expect their retirement pot to be, versus what they think their retirement will be like:
|£40k to £60k||44% expect comfortable or secure retirement|
|£60k to £80k||46% expect comfortable or secure retirement|
|£80k – £100k||46% expect comfortable or secure retirement|
|£100k – £120k||54% expect comfortable or secure retirement|
|£120k – £160k||78% expect comfortable or secure retirement|
|£160k – £200k||72% expect comfortable or secure retirement|
|£200k – £300k||76% expect comfortable or secure retirement|
|£300k – £500k||87% expect comfortable or secure retirement|
|£500+||87% expect comfortable or secure retirement|
*Research conducted by Opinium from 8 – 12 September 2017 with 2,007 UK employees aged 22 to 66.
**Source Money Advice Service annuity comparison tables, healthy person living in London, five year guarantee, no increases, no spouse pension