New data revealed by UK finance giants, Wellesley, have revealed staggering statistics indicating that over 33% of UK citizens do not currently save into a pension scheme.
The research has provided a worrying insight into the number of people who are unprepared for retirement. Britain currently has one of the lowest state pensions out of any country in the developed world and solely relying on this as a retirement income is a grave mistake.
If you are fortunate enough to qualify for a full state pension you will only be eligible to receive £164.35 a week. To get this small amount you will have had to contribute at least 35 years’ worth of National Insurance Contributions. Could you live off of £23 a day?
Wellesley stated that: “There is a serious lack of knowledge amongst UK citizens when it comes to pensions. Changes in products, terminology, and reforms of the market as a whole over the past 30 years are partly to blame for people’s lack of understanding. The government and pension providers haven’t done enough to educate people after changes have been implemented.”
If these individuals continue on the same path they will wind up retiring with very little money in the bank. The best age group for pension planning are 45 to 54-year olds, but still, only 66% of them are regularly paying into a pension pot. The worst age group was those between the ages of 18 to 34-year olds, of which 42% were not paying into any pension pot.
This is a worrying trend that echoed throughout the U.S not that long ago following the recession in 2008. The result was an entire generation who couldn’t afford to retire, too poor to retire and too young to die. If things continue it’s possible we may see a reflection of these events coming into effect here in the UK.
The upside is that it’s not too late and we still have time. If you’re over 50 with no retirement savings there are still things that you can do. Putting aside around £470 a month would give you a savings pot of around £100,000 for when you retire at 65. While it might not be the largest amount, £100,000 is still a sizeable amount and can even potentially be invested in assets such as property for buy-to-let schemes.
Thanks to compound interest, Government programmes like the introduction of the Life Time ISA and a variety of different pension schemes, it is never to early to start saving for your retirement. While many may believe that their retirement is too far away to start worrying about, the sooner you get some savings put away the quicker they’ll grow and the less you’ll have to worry.
Another reason why people typically report to avoiding pension schemes is that they don’t understand where their money is going. The UK currently has an unclaimed pensions pot of over £300m and with pension companies constantly changing names and closing up shop, it’s understandable that people are nervous about investing in their own futures.
The best steps you can make is to have both physical and digital evidence of your pension documentation. Keep a record of the companies, how much you have been paying in and during what time period. Hang on to old payslips and then when the time comes it will be pretty straightforward to tracking your money down.
We have all heard the stories of scam companies and greedy white-collar criminals who embezzle millions from their companies’ pension funds. As a result, there is little wonder why so many people are scared off. In reality, though it is fairly straightforward to ensure that your pension is protected. The following are some of the most popular types of pensions, but if you don’t see yours listed here or want more information you can visit the Government’s website on workplace pensions.
Defined Contribution Schemes:
These are typically run by pension providers and not directly through an employer. If the pension provider goes bust and they were authorised by the Financial Conduct Authority (FCA), you are eligible for compensation from their Financial Services Compensation Scheme (FSCS).
If your pension provider is not regulated by the FCA it might be time to switch or start asking some questions. Also, make note that these savings are only protected up to £85,000 so if you have more than that it might be worth considering splitting your pension pot.
Defined Benefit Pension Schemes:
These pensions are normally organised by your employer. They can also be called ‘final salary’ or career average’ pension schemes. The amount you get is typically worked out based on how much you earn and how long you have been with your current employer. One of the benefits of this type of pension is that 25% is tax-free.
If your pension falls under the Defined Benefit Pension Scheme it is usually protected by the Pension Protection Fund. Last year the organisation shelled out £661m in compensation to people who had their pensions wrongly impacted. That might seem like a big figure but considering they have a reserve of over £6.1bn, your money is well protected.