Only one in five adults are paying into a pension, relying solely on the State Pension and risking poverty in retirement.
Although the introduction of auto-enrolment in October 2012 has helped boost the number of people paying into a pension scheme, the total figure saving towards retirement is less now thatn it was in 1967.
According to the Office of National Statistics there was an increase in the number of people paying into a pension scheme between 1953 and 1967 from 6.2 million to 12.2 million. After 1967 this figure steadily declined to 2012 when it hit 7.8 million. This figure was up to 8.1 million by the end of 2013.
“People are living longer and are likely to enjoy a longer retirement. But many people are not saving for their retirement at all, and many that are saving are not saving enough,” finds the ONS report.
By 2018, auto-enrolment is expected to have boosted the number of people paying into a pension scheme by 10 million. But the programme has its faults. The minimum earning threshold means that many part-time workers will not be enrolled into pension schemes. This unfairly penalises women who are more likely to be working flexible hours after returning to employment following childbirth.
Neil Lovatt, director at Scottish Friendly said that auto-enrolment was clearly having the desired effect, but there were still far too many people that were not contributing to a pension.
“While public sector workers have embraced occupational pension schemes, the private sector is lagging behind,” he said. “8.3 million participants represents less than 20% of the adult population in the UK. So the question is, what are the others doing?”
Scottish Friendly research shows that many workers are putting off pension provision until they are closer to retirement. But the longer you put off saving for retirement, the larger proportion of your wage you have to set aside each month to make up the difference.
Lovatt says that one of the reasons workers choose not to start saving is lack of flexibility.
“While there is now more freedom with pensions, many are still put off from locking away their money until retirement,” he said.
“Those who don’t want to see their money tied up would be better served with a long-term savings strategy. By investing in ISAs, for example, people will have a more flexible route to retirement planning.”