Low and middle income-earning women are two of the groups at risk (Image: Getty)
The Pension Commission has issued an urgent warning as they estimate 15 million Brits are under-saving for their retirement. The Commission has called for a new national strategy to solve the deteriorating crisis. In its interim report on retirement savings, the body warned that certain demographics will struggle more than others, even from the moment they retire.
While the Pensions UK benchmark for a basic standard of living is £21,600 for couples, the figure is £13,400 for those who are single, not accounting for income tax, housing or care costs. But, according to a Scottish Widows study, raising the auto-enrolment rate to 12% of total salary would leave only 13% of people short of these retirement income targets.
The issue risks millions of Brits relying on state support during their retirement period (Image: Getty)
Right now, those enrolled into work pensions save a minimum 8% of a certain portion of their salary with total earnings being between £6,240 and £50,270 a year before tax.
While workers put in 4% and employers 3%, the Government contributes 1% via tax relief. However, many employers can be more generous and pay in above the 3% minimum, especially if they choose to increase their contributions.
Those currently most at risk include low and middle income-earning women and those who are self-employed. The commission went on to warn that, without any decisive action, the number of those in danger of financial instability later in life could increased to 19 million people.
This widespread issue also risks millions of Brits relying on state support during their retirement period.
The interim report said: “The forces reshaping our society – longer retirements, slower growth, and falling home ownership – demand a renewed national settlement on pensions.”
The report elaborates on the role of population in this dilemma, placing a severe strain on government finances and the workforce.
“The number of people aged 75 or over is projected to double between 2025 and 2075: a rise of six million.
“State pension age increases and slowing life expectancy increases have kept down the old-age dependency ratio during the past 20 years, but over the next decade it is expected to reach three pensioners for every 10 working-age adults and four for every 10 by the 2070s.”
The Commission commented on the future of this problem. Pensions commissioner Baroness Jeannie Drake said that reaching a new strategy with this current pension crisis “will require clarity of purpose, but it also offers a moment of opportunity; to renew a social contract that commands confidence across the country”.
Dr Yvonne Braun, ABI Director of Long-Term Savings Policy said: The report makes a powerful case for a new national settlement for pensions. Automatic enrolment is a sturdy foundation, but must evolve to meet the scale of the challenges ahead.
“We and our members stand ready to work with the Commission to deepen saving, extend coverage and support better decisions in retirement, so that everyone can look forward to greater financial security in later life.”