Millions of workers saving less for pensions because of cost of living crisis

At a time when people are having to pay more on their National Insurance to help fund social care, worrying figures show that around 16 million workers are not saving enough for their retirement.

According to new research commissioned by the Living Wage Foundation and completed by the Resolution Foundation, the numbers exclude Defined Benefit pension savings.

Fewer than five per cent of lower paid workers are saving at a rate which would provide an adequate standard of living in retirement.

Funding not adequate for retirement

This is being made worse by the cost of living crisis with soaring energy and food bills, which is hitting the lowest paid.

They are faced with a choice of paying for today’s costs, but they are in danger of storing up problems for when they reach retirement age and their pensions are not adequate.

In a new report “Living pensions: An assessment of whether workers’ pension saving meets a ‘living pension’ benchmark”, the Living Wage Foundation is calling for the development of a new ‘Living Pension Standard’  to build on the work of the real Living Wage by providing stability and security for workers in the future.

Employers taking part in pilot scheme

The Living Pension is currently being piloted with a number of employers and the initiative is funded by abrdn Financial Fairness Trust, an independent charitable trust.

As in salaries generally, women are worse affected according to the report, with just 15 per cent meeting their whole career pension benchmark, which is the Resolution Foundation calculation of how much will be needed in retirement.

This is against 23 per cent of male workers and is driven principally by differing levels of pay rather than differing saving behaviour. 

Auto enrolment has made progress

The report finds that auto-enrolment has helped, but there are also huge variations in whether workers are meeting the Living Pension benchmarks by sector.

More than half at 55 per cent of those in finance save at or above the benchmark, compared to just two per cent in hospitality and the differences persist even if they account for variations between sectors in workers’ pay levels, occupation and whether they are full-time.

Katherine Chapman, Director of the Living Wage Foundation, said: “The current cost-of-living-crisis has hit low paid workers hardest, and many are not only struggling to keep their heads above water today, but also worrying about an uncertain future. This report shows that 16 million people are not saving at levels which are likely to prevent poverty beyond their working lives. Today’s cost-of-living crisis is tomorrow’s pensions crisis.”

For help and advice on pensions and related matters, give us a call today.

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