Research shows a potential shortfall in UK pensions

The Momentum UK Team 19 November 2012

61% of the UK population is unwilling to contribute more than 5% of monthly earnings to pensions. The results suggest a future pensions shortage in many people's retirement funds, a study from Friends For Life, the insurance and pension provider reveals.

The numbers shown in the study point towards a pensions shortfall. With such a large amount of people reluctant to contribute more than 5%, despite the fact that it would most likely not be enough to generate the level of income many expect in their retirement.

Of the people questioned only 13% said they would be willing to contribute more than 10%.

The current minimum level of auto-enrolment is at 8% this is including employer contributions and government incentives.

To offset this lack of preparation many are calling for further incentives for saving. The study showed that further tax relief would be the most popular means of encouraging people to invest in their pensions. Many also cited better clarity on what their investments would provide them in their old age. Other features that rated highly were the ability to withdraw money from the pensions saving account.

Alarmingly however, one in five people questioned said that nothing would encourage them to invest more in their pension contributions.

The government lead auto-enrolment scheme aims to get people thinking about, and saving for their retirement. However the statistics suggest that many are still denying the realities of saving.

Colin Williams, Managing Director of Corporate Benefits at Friends Life said;

"The easiest way to prevent retirement poverty is to encourage employees to start saving early. If auto-enrolment fails to kick-start the fight against retirement poverty, the government will have to consider other options, which may include compelling people to save rather than just nudging them along."

Despite the auto-enrolment incentive, almost 10% of people questioned said that they would struggle to make ends meet with as little as a 1% contribution to their pension fund.

With so many under pressure in their day to day lives, protecting against retirement poverty is has a long way to go.