After years of momentum in building better long-term savings habits in the UK, this golden era of progress is in danger of coming to an end.
There is a real risk that Covid-19 will have an impact on even short to medium-term saving.
But worryingly, there is already an existing problem; almost half of 22 to 29-year-olds are still not saving enough for the future.
Auto-enrolment has been a powerful tool that relies on inertia to boost retirement planning – around 10m people now save into a workplace pension.
In less than a decade, it has turbo-charged the number of adequate savers in the UK – those putting away the recommended minimum 12 per cent – to a record high of 60 per cent, giving more people a better chance of retiring in safety and security.
However, we should not celebrate prematurely.
Auto-enrolment has not been a silver bullet and despite there being a 21 percentage point increase in the number of young people saving adequately since 2017 (from 30 per cent to 51 per cent), they still fall below the national average of 60 per cent.
There is still the danger of this progress plateauing, as there are currently no further increases in contributions planned.
Another key area of concern is that auto-enrolment excludes some of the nation’s youngest savers; employees aged 22 and above benefit from the scheme but there have been calls for this to be lowered to 18-years-old.
There have also been calls from the industry to reduce or remove the earnings threshold of £10,000, but there are no signs of change here.
By not making either of these changes, the UK’s youngest workers are missing out on vital contributions to help boost their retirement pots.
‘Multi-jobbers’ missing out
It is not just young workers who are at a disadvantage. There are 6.8m people in the UK who have more than one job, so their income is split across multiple employers.
This can mean these ‘multi-jobbers’ miss out on much-needed pensions contributions as they fall short of the minimum earnings threshold for each employment.
The government reviews the earnings threshold annually and has maintained this at £10,000, which means that it has reduced in real terms. However, in order to make a material difference to multi-jobbers, a significant reduction or abolishment would be required.
Whether it is our physical or financial health, Covid-19 has proven it does not discriminate.
One in four people are concerned about their ability to pay for essentials since the outbreak.
Understandably, many do not see retirement saving as a priority in the face of short-term financial worries and 3.7m people have told Scottish Widows they have reduced or ceased saving for retirement.
The tension between long-term savings and short-term priorities is not new.
Prior to Covid-19 many Brits were already at risk of pensioner poverty, with 40 per cent failing to save adequately and 15 per cent still not saving anything.