Employers will be faced with prospect of a poverty-stricken workforce unwilling to retire if employees continue to cut retirement savings in the face of rising living costs, pensions experts have warned.
A survey of 1,500 people by insurer Prudential painted a bleak picture of pensions savings. It found that UK workers have almost halved their monthly voluntary pension contributions over the past year, from £279 to a current £145. At the same time, 55% of respondents admitted to not currently paying into a pension at all.
Despite this, people paying into a scheme still expected to receive an average annual pension of £22,504 a year when they retired. However, the survey warned that a payout of that size would require an average contribution of £286 a month from the age of 20 to 65.
Rachel Vahey, head of pensions development at financial services firm Aegon Scottish Equitable, said that in a difficult financial climate, pension contributions were an easy way to cut expenditure in the short-term. “However, if people don’t make up the shortfall later, they might be forced to work longer to supplement their income,” she warned.
Steve Herbert, senior benefits education consultant at advisory firm Origen, warned that this would mean workers unwilling, or unable, to retire. “These employees will then be increasingly keen to stay in the workplace, which may present difficulties with succession planning,” he said.
The National Association of Pension Funds said employers should continue to emphasise the benefits of their workplace pension.