Analysis by the Office for National Statistics (ONS) and the Department for Work and Pensions (DWP) has revealed that around 40 million people now have a private pension – the highest level ever recorded.
While this sounds like positive news for the pension industry, leading pensions expert Stuart Price from Quantum Advisory, has warned it may be a false sense of achievement and welcomes Pension Awareness Day this week (15 SEPT) to engage with the population and encourage them to realistically save for their retirement.
Stuart said: “The huge upsurge in pension members is reassuring and is largely a result of the auto enrolment regime established by the government in 2012, however it is the amount being saved that is concerning. The current system sees those aged between 22 and state retirement age and earning more than £10,000 pay a minimum 3% of their earnings into a pension scheme, while their employer also contributes 2%. From April 2019 this will increase to 5% from the employee and 3% from the employer.
“Many employees think that because they are in a pension scheme, paying in the minimum contributions will allow them to enjoy a comfortable retirement, but this is far from the case. The increase in contributions next April may result in a surge of people opting out, but the reality is the figure needs to be a lot higher than the scheduled 8%. I would say 12% could be a more realistic figure, but this should be done gradually so as not to undo the positive results auto enrolment has already achieved. I personally recommend an individual saving half their age, so a 30 year old should be saving 15% of their wages into a pension pot.
“I understand that pensions can seem like a minefield to a lot of people and that is what Pension Awareness Day is all about; encouraging people to seek advice, ask questions and understand what position they are in and where they want to be, come retirement. The event is aimed at all ages as well – the younger you understand your obligations, the better position you will be in.
“The planned introduction of the Pension Dashboard in 2019 will go a long way to helping everyone access and manage all their private pension arrangements in one place – hopefully along with their State Pension – so they will clearly see their expected income in retirement.”
The Pension Awareness Day Bus is doing a tour of the UK and will be visiting Cardiff, on Thursday 13 September, 10am-6pm.
For more details, visit www.pensionawarenessday.com, or for more information about Quantum Advisory, please visit: www.quantumadvisory.co.uk.