A growing number of people are at risk of being unable to afford a decent standard of living after retirement, according to a new report.
The report, ‘What is an adequate retirement income?’ estimates a quarter of people approaching retirement, the equivalent to five million people, are at risk of missing out on the income they need.
The report by the Pensions Policy Institute, sponsored by the Centre for Ageing Better, warns millions of people in their 50s and 60s are running out of time to prepare financially for retirement. The research found a low state pension, increasing unemployment and the transition to workplace pension schemes reliant on employee contributions are all factors leading to this risk. It warns this is an immediate cause of concern for those currently in their 50s and 60s.
Not only that, but generations to come also risk being pushed into poverty if action is not taken to address financial insecurity in retirement, the report warned. It found 90 percent of people of all ages with Defined Contribution pensions may be at risk of falling short on their expected retirement income. Despite recent measures such as auto-enrolment having resulted in more people saving into their workplace pensions, savers aged over 50 spend less time in auto-enrolment schemes and consequently benefit less.
Most pension contributions remain inadequate, and challenges for savers have been exacerbated by COVID-19. The report also highlighted that those aged over 50 had the highest redundancy rate during the pandemic and warns that this age group is more likely than younger groups to experience long-term unemployment. Worryingly, increasing job losses and unemployment levels may result in the generation currently approaching retirement being pushed out of work and left with a pension that does not provide them a decent standard of living.
The report calls for a new consensus on what adequacy means, urging the Government to build a consensus between employers, industry, unions and individual stakeholders on what an adequate income in retirement is. Furthermore, Ageing Better is calling on employers to match workplace pension contributions at a higher rate, as well as better support for groups at risk of financial insecurity.
The further in advance you start planning for it, the more you improve your chances of achieving the retirement you want. However, even if your retirement is close and you have done little to prepare, any action you can take now is generally better than none. If you would like some help planning for your retirement, please contact us.
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