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Analysis suggests that at a pensions “crisis point” in less than two decades, 2.7 million people will retire with less savings than they need.
Research found that 59 per cent of ‘defined contribution’ (DC) savers, with pensions based on what they contribute rather than gold-plated ‘defined benefit’ (DB) schemes, would fall short in the 2000s. 2040.
They are part of a “lost generation”, currently middle-aged, who have missed out on the generous BD plans that were more widely available in the past.
At the same time, they will also not have benefited from lifelong automatic enrollment in retirement funds, a system that was implemented years after they started working.
Warning: At a pensions ‘crisis point’, 2.7 million people will retire with less savings than they need, analysis suggests, and the state pension will not be enough to sustain them (file image)
“The years 2040 to 2044 represent a critical period in which the largest number of non-savers will retire,” according to analysis by savings and retirement group Phoenix.
The problems will begin in the next five years, when most savers in developing countries end their working careers with less income than they need or expect, before reaching a “crisis point” in the 2040s.
Analysis shows that those affected in 2040-2044 will predominantly be born in the 1970s, be female, work full-time and earn less than £80,000 (about half of them on less than £20,000) and expect to retire between ages 66 and 70 years.
This adds to warnings from many in the wider industry that workers are not saving enough for their retirement and could become even more discouraged if – as feared – Chancellor Rachel Reeves launches a raid on pension savings at her budget at the end of this month.
Patrick Thomson, head of research and policy analysis at Phoenix Insights, said: ‘The analysis paints a bleak picture of future retirement income.
‘We are already reaching the stage where most people with a defined contribution pension will retire with less than they expect or with less than they need in terms of a minimum standard of living.
«This situation will worsen over time and will peak in the next 20 years.
“There is an urgent need to address insufficient savings to better help people achieve financial security in the future.”
Thomson said that to address the problem, ministers should consider raising minimum auto-enrolment contribution rates and policies to make it easier for people over 60 to work “so people can continue to earn and save later in life.” .
“The plight of retirement income is evident, but we have a golden opportunity to take meaningful action to turn the tide on undersavings and improve the retirement prospects of future generations,” he added.
“These are not really the problems of tomorrow anymore.”
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