The pension gap between what British workers are prepared to save and what they need to is widening. Meanwhile both workers and bosses have a worrying lack of knowledge about pension levels and rules.
New figures published today will send alarm bells ringing in Government that its plans to ensure people save for their own retirement, rather than relying on State help, will prove inadequate.
In the last year the amount employees are prepared to stash in their retirement savings pot has shrunk by almost a quarter, according to the 2013 Scottish Widows Workplace Pensions Report.
The figures suggest that the average worker will now face a £669 monthly shortfall when they retire, with those earning £50,000 or more a year set for a £1,101 shortfall.
The Government’s auto-enrolment programme, which effectively forces firms to put their workers into company pension schemes, is designed to help reduce the pension gap facing millions in the future.
But the new research shows an alarming decline in the amount that those who are yet to be auto-enrolled are willing to save each month.
Some 8.6m people across the UK are set to be auto-enrolled into a workplace pension scheme in the next couple of years. The amount they are willing to save each month has fallen from last year’s levels in every salary bracket, apart from those who earn £50,000 or more.
Worryingly, the research reveals significant gaps in people’s knowledge about how much they are paying into a pension – even among the 1m employees who have already been auto-enrolled into their workplace scheme.
More than a quarter have no idea how much they contribute while almost half do not know how much their employer is contributing.
Awareness remains particularly poor among lower earners, the main group of people at whom the scheme is targeted, with one in five employees on an annual income of under £30,000 still not aware of the changes.
Lynn Graves, corporate pensions chief at Scottish Widows, warned: “We cannot ignore the fundamental correlation between poor employee awareness of the scheme and the lack of understanding of the realities of retirement. The alarming fall in the amount that employees are willing to contribute only serves to highlight this.”
Tom McPhail, head of pensions research at advisers Hargreaves Lansdown, said: “The research highlights the reality that we’re still a long way from mission accomplished when it comes to pensions. Most employees aren’t saving enough as it is, yet according to this research the amounts they are willing to save are actually falling.
“This highlights the vital role that employers, advisers and pension companies have to perform in helping employees to plan effectively for retirement.”