Published On: Wed, Aug 21st, 2019

State pension CRISIS: Nine million Britons ‘sleepwalking into retirement’ in huge timebomb | Personal Finance | Finance

Two thirds of employees aged 45 and over, around nine million, have no idea how much they need to save for a comfortable retirement, research from Aviva shows. Many do not even know what type of pension scheme they have or how much the state pension is currently worth. Aviva managing director of savings and retirement Lindsey Rix said millions of midlife employees are “flying blind, and fast, towards their retirement”, without a clear picture of what they need to do.

The full new state pension pays just £168.60 per week or £8,767.20 a year, which means additional savings are essential.

Aviva said there is still time for the middle-aged to play catch-up as a 45-year-old on the average UK salary of £28,000 could still build a pension pot worth more than £50,000 by age 65, using an employer’s scheme.

Aviva has launched a mid-life MOT for its own staff and has called on other companies to demystify pensions for its employees.

Rix said assemble all your pension pots, using the Pension Tracing Service to locate plans from previous employers, and seek a state pension forecast.

Employers are legally required to pay into a workplace pension, but only if you do not opt out and make regular contributions into the plan.

“If you save, your employer must save with you too. Also, find out if there’s financial guidance available at your workplace,” Rix said.

Nick Onslow, chartered financial planner at The RU Group, said the closure of final salary schemes and a lack of pension advice has worsened the problem: “People are also living longer and inheriting later, or losing their inheritance to care costs.” 

Many of the people approaching retirement are also funding children through university or have the added expense of young adults living at home, while simultaneously looking after ageing parents.

“This all eats away at the amount of money people have to save for their retirement,” Onslow said.

Chase de Vere chartered financial planner Patrick Connolly said the UK is facing a pension crisis and middle-aged people are often hardest hit: “Many older people got final salary pensions, took their state pension earlier and have benefited from huge house prices rises, while younger people are saving into pensions earlier through their employer’s auto-enrolment scheme.”

Connolly said it is still better to save something than nothing at all: “Maximise payments into a pension, ideally through a workplace scheme, and if you don’t know what you’re doing take independent financial advice.”

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