Mind the gap: Up to 12 million face pensions shortfall
Third of all workers will see decline in their living standards, warns Government minister
Nearly a third of all British workers are heading for a substantial fall in their living standards when they retire – with the majority being medium to high earners, ministers have warned.
A new study by the Government, released today, reveals that up to 12 million people will face a shortfall in their pensions despite the introduction of automatic enrolment.
It found that around one in 10 of those earning more than £35,000 a year will end up in the poorest 20 per cent of pensioners when they retire.
The report concluded that someone earning £40,000 a year would need to save £5,260 a year including employer contributions to have same standard of living in old age.
Launching the paper, Steve Webb, the Pensions minister, said that the pensioners of tomorrow could not afford to rely on the state pension which, because of the growing elderly population could only ever be a “floor”.
“In a world where there are 50 per cent more pensioners, you can’t just hope that a future Government will honour a large state pension to ever more pensioners,” he told The House magazine.
“There’s a limit to what one can do to address those sorts of things. When you have got nine workers to every pensioner, you can have pretty generous pensions. When you’ve got two workers to every pensioner, it just ain’t gonna hold.”
The report found that just over 13 million people will be headed for a fall in living standards without the Government’s push to enrol employees automatically in work-based pensions. This is two million more than ministers had originally thought, but should be reduced by around 1 million to 12 million by automatic enrolment.
Mr Webb said: “Under-saving is far from being the exclusive preserve of low earners. Many on middle and higher incomes clearly need to do much more than this to ensure that they get the retirement that they want.”
The Government has long been aware that the UK’s falling savings rates, combined with an ageing population, will pose significant challenges. They commissioned the study in an effort to get an accurate estimate of the problem.
Already the Government has legislated to increase the state pension age to 68, and to link it in future to average life expectancy. This could mean it reaches 77 for current school leavers.
But Mr Webb said there was also a problem of people who stopped working early often because of poor health. “Those who drop out of the labour market in their 50s – perhaps due to long-term sickness, general poor health or caring responsibilities – can seriously damage their retirement income,” he said.
- 1 Jeremy Clarkson 'sees no problem' with his racist language on Top Gear, says BBC
- 2 'Alien thigh bone' on Mars: Excitement from alien hunters at 'evidence' of extraterrestrial life
- 3 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 4 London restaurant 34 creates champagne glass modelled on Kate Moss’ left breast
- 5 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Bin bag full of cats' heads discovered near Manchester's Curry Mile
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
iJobs Money & Business
£30000 - £40000 per annum + benefits+bonus+package: Harrington Starr: C#.NET ...
£20000 - £30000 per annum + benefits+bonus+package: Harrington Starr: Junior D...
£550 - £650 per day: Orgtel: Business Analyst - Traded Credit Risk - Investmen...
£55000 per annum: Harrington Starr: A financial software vendor at the forefro...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony