Report identifies those most at risk of poor retirement

Part-time and gig economy workers, low paid and women among those most at risk of inadequate retirement incomes.

A Work and Pensions Committee report into the adequacy of pension provision: ‘Protecting pension savers – five years on from the pension freedoms: saving for later life’, published this morning found that: 

• Part-time and gig economy workers, women who take time out of work to care, the low paid, and people over 40 who did not have a defined benefit scheme but have not had enough time to build up decent pots through auto-enrolment, were singled out as groups most at risk of inadequate retirement incomes.
• Recommended the government implement measures proposed in the 2017 review of auto-enrolment to increase minimum contributions gradually from 8% to 12% of earnings, to reduce barriers to auto-enrolment for the low paid and for those aged 18 to 22 and to introduce savings plans for the self-employed.

Commenting on the report, Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “Retirement adequacy is the new buzz phrase when it comes to pensions. It has become clear that, thanks to auto-enrolment, the issue the UK now faces is not so much not enough people having a pension, but about whether the pension or pensions most of us now build up through work will actually give us a decent living standard in retirement. As the report points out, a big problem is that so many people are just ‘unaware they are not saving enough’, perhaps lulled into a false sense of security by the mere fact they have a pension. It is clear that 8% of earnings even for those on average incomes is not going to be enough.” 

In its final report of a three-part enquiry, the Committee said: “It is time to address the challenges which mean many people are unaware they are not saving enough for an adequate income in retirement”. It also acknowledged the difficulty of introducing measures to increase pension contributions during the cost of living crisis, adding: “We are keenly aware of the difficulty of raising these questions at a time when many people are struggling to meet their present needs. However, we also believe that not doing so risks a crisis in future, as many people find they will not have adequate income in retirement only when it is too late to do anything about it.”

Becky added: “The cost-of-living crisis is a challenge to continuing to save for the long term. In the main, people understand that in making budget cutbacks, pension contributions should be one of the very last things to go. But we also have to be realistic about the challenges people face and temporary reductions to contributions, in some extreme circumstances, might well be the right thing to do to give someone a bit of breathing space - as long as the intention is to resume again as soon as possible.”