TUC shock figures show extent of pensions shortfall

A
new TUC analysis shows that the average contribution to an employer-

sponsored
stakeholder pensions is £3,000 a year short of the contributions required to
provide a pension of half the average annual UK salary.

The
average contribution to an employer-sponsored stakeholder pension is £44 a
month – around £250 less than someone on an average salary needs to save each
month of their working life to secure a decent pension of half their salary,
says the TUC.

Inland
Revenue statistics show that 440,000 employees have set up employer-sponsored
stakeholder pensions. The total employer contribution is £130m, an average of
£295 a year or £25 a month per employee. The total employee contribution is
£100m, an average of £227 a year or £19 a month.

Experts
agree that to retire with a pension of half their salary, people need to start
saving in their 20s and need contributions of about 15 per cent of their
income. Yet these figures show that the average employer contribution rate is
1.25% of the average UK salary of £23,607, and the average employee
contribution is less than 1% (0.96%) – a shortfall of £3,000 a year.

TUC
General Secretary, John Monks, said: "We support the basic principle
behind stakeholder pensions. They are low cost, easily portable pensions that
are easy to contribute to through the wage packet.

"But
these shocking figures show that they are doing little to plug the pensions gap
among those who do not have a proper occupational pension. The average contribution
is just £44 a month. This may be better than nothing but it will not provide
the kind of pension people at work today will need.

"Stakeholder
pensions will only take off when employers are forced to contribute to their
employee’s pensions.

"This
evidence shows that when all the responsibility for saving is thrown on to
individuals, they cannot afford to save enough, and often end up saving nothing
at all.

"If
employers make a decent contribution then employees are much more likely to
save as well. That is why the TUC’s ‘pay up for pensions’ campaign states
employers, government and employees must share the pensions burden."

By Quentin Reade

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