£31,300 warning issued to anyone who is 'approaching retirement'
Pensioners have been warned they face a "grim" retirement as their pots falls short of what they need for a comfortable retirement. A new study by the Institute for Fiscal Studies (IFS) has revealed that up to seven million British pensioners have insufficient pension savings.
Between 30 and 40 per cent of workers with defined contribution pension plans may struggle financially in later life, the IFS data showed. 20 per cent of employees are not saving any money in a pension pot at all, the IFS data has discovered.
The IFS data also showed less than half are putting away more than eight per cent of their earnings for retirement. Laurence O'Brien, an IFS research economist and report author, explained: "Too many private sector employees appear on course to end up on a low – or disappointing – retirement income."
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The current minimum standard for a single individual is £14,400 per year. The moderate and comfortable standards are £31,300 and £43,100, respectively. The equivalent figures for couples are £22,400, £43,100 and £59,000.
David Sturrock, another report author, added: "There is a strong case for almost all employees to receive an employer pension contribution, irrespective of whether they make a contribution themselves." Mubin Haq, chief executive of the abrdn Financial Fairness Trust, adds: "Guaranteeing 3 per cent from the employer regardless of whether an employee makes a contribution could boost employer pension contributions by £4billion per year.
"This would particularly benefit women, those working part-time, young adults and the low-paid." Tim Gosling, head of policy at People's Partnership, welcomes the focus on affordability for lower earners, stating: "Workplace pension policy has to work at all points in the earnings distribution."
A Department for Work and Pensions (DWP) spokesperson said: "We will ensure the pensioners of tomorrow have the dignity and security they deserve in retirement as we carry out our landmark pensions review to boost investment, increase pension pots and tackle waste in the pension system."
"More than 15 million savers could benefit from our new Pension Schemes Bill – with the potential for an average earner to have £11,000 more in their defined contribution pot by retirement," they added.