Millions of people across Britain are facing a “cliff edge” when they retire due to a chronic shortfall in saving that will require a radical shake-up of the pensions system, a government-backed report has warned. The Pensions Commission said 15 million people are currently not saving adequately for their retirement, and warned this could rise to as many as 19 million without action.
The commission, revived by Keir Starmer last year, said the lack of adequate saving risked “leaving large groups across the UK facing a severe cliff-edge when they retire”. It warned that as many as 45% of working-age adults are not saving into a pension at all, despite nearly half of them being in work. Low and middle earners are most at risk, with around half saving at minimum levels set by automatic enrolment.
Under auto-enrolment, employers must place employees in a pension and contribute a minimum of 8% of a worker’s earnings, with the worker paying 5% and the employer adding 3%. However, just 4% of wholly self-employed workers are saving for retirement, with even lower levels among younger self-employed people. The report also found that about 30% of private pension pots are accessed at the earliest possible opportunity, with around half of savings taken out in full, often spent on large expenses like a car, holiday or renovations.
Women approaching retirement have on average half the private pension savings of men, with a median pension wealth of £81,000 versus £156,000. The commission, led by Jeannie Drake, is expected to publish a final report with recommendations for changes to government policy next year. Torsten Bell, the pensions minister, said: “Britain has got back into the pension saving habit, but the job is only half done with tomorrow’s pensioners still on track to be poorer than today’s.”
