In two separate reports, life and pension providers Aegon UK and Scottish Widows have warned that the industry must do more to engage the younger population and prepare them for retirement.
The Scottish Widows Retirement Report – which surveyed 5,000 people – found that although a healthy 56 per cent of the UK population are saving adequately for retirement, there was still no improvement in the number of non-savers, with 20 per cent of workers aged 30 or over earning at least £10,000 a year – around 6.2m – failing to put anything away.
A similar proportion of people have no savings or investments, an increase from 17 per cent last year to 19 per cent.
Meanwhile 43 per cent of those with annual personal incomes under £10,000 are failing to save anything for retirement, compared to 24% of those earning up to £30,000 and just 9 per cent of those earning more than £30,000 a year.
The research also found that the savings gap was also widening among the self-employed and those working for small businesses, with 39 per cent of self-employed people and 30 per cent working in a small business not saving anything at all, up significantly from 23 per cent last year.
Ian Naismith, retirement specialist at Scottish Widows, said: “Despite the positive signs, causes for concern remain, as savings levels among the self-employed and workers for small employers declined this year.”
In May, Aegon UK’s third Retirement Readiness survey found that although more than 50 per cent are saving, only 7 per cent were on track. On average, people believed they will retire on an average yearly income of £42,000 – higher than the £35,000 estimated in 2014, and far higher than the average UK salary of £26,000 a year.
This was despite the fact that this would require a saving pot of more than £1m, a sum higher than the new pension lifetime allowance.
David Beattie, managing director at Aegon UK, said: “It is reassuring to hear that half of over-30s are saving over 10 per cent into their pension, but it is important we also look at the bigger picture and consider younger savers and those who have catching up to do.”
Jeremy Fawcett, head of direct for consultancy Platforum, said it was unsurprising that people were getting it wrong when working out how to save for their pension.
He said: “While the pension-holding aristocracy may use their Sipp entirely as an inheritance vehicle, this leaves the rest reliant on drawdown income, in a world where no consensus exists among professional advisers about asset allocation in drawdown or cash flow planning. What hope is there for DIY-ers to get this right?”
■ The IFP launched a certificate of financial planning in 2010, while the CII launched their equivalent the year after. Both are QCF level four qualifications.
■ Those who achieve the IFP’s qualification can then call themselves accredited paraplanners, whereas those who attain the CII qualification can append it to their names
Dan Farrow, director of Essex-based SBN Wealth Management, said: “Understandably, people on lower incomes are more concerned with putting food on the table. There is much more work to be done. We are not very financially educated. The education system lets us down.”