ISSUES
: Business and Trade
Chapter 1: Business today
14
“Work till you drop” warning on pensions
Some people may have to work till they are 81 to build up a decent pension pot, according
to a report.
W
ith the Government carrying out a review of
the state pension age, research from Royal
London says an average earner who starts
saving for an occupational pension at 22, and makes
the minimum statutory contributions, would need to
work until 77 if they want the sort of “gold standard”
pension enjoyed by their parents.
Royal London defines this “gold standard”, which includes
the state pension, as two-thirds of pre-retirement income.
For those living in high-income areas, such asWestminster
and Wandsworth in London, achieving a pension pot of
this size would take till 80 or 81, assuming contributions
are not increased.
At the same time, a review for the Labour Party
has concluded that employees should double their
contributions to workplace schemes, with a target of 15
per cent of earnings going into pension pots.
Traditionally, the state pension age was 65 for men and 60
for women. This is being equalised and in two years’ time
it is due to rise, reaching 67 by 2028.
This could rise again as a result of a government review,
amid warnings that those starting work today could have
to wait until their mid-70s before they receive a state
pension.
Royal London’s research shows that how much people
need to save in occupational schemes, if they want a “gold
standard” pension, varies according to where they live.
Variations
While someone in Westminster who makes minimum
monthly contributions would have to wait till they are 81, a
worker in Boston, Lincolnshire, where incomes are lower,
would build up a big enough pot by 73.
Ages for Scotland, Wales and Northern Ireland are 77, 76
and 76, respectively.
Former pensions minister Steve Webb, who is director
of policy at Royal London, said: “It is great news that
millions more workers are being enrolled into workplace
pensions, but the amounts going in are simply not enough
to give people the kind of retirement they would want for
themselves, and certainly not the sort of pensions that
many of those retiring now are enjoying.
“Even in lower wage areas, people face working into their
early 70s to get a comfortable retirement. In higher wage
areas, the state pensionmakes amuch smaller contribution,
so workers in those areas face working well into their 70s.”
Mr Webb said the answer was to start saving early and
increase pension contributions.
2 March 2016
Ö
Ö
The above information is reprinted with kind permission
from
Channel 4 News
. Please visit
for further information.
© Channel 4 2016
Personal pensions (including stakeholder pensions): scheme members’ annual
contributions
Numbers of members and value of contributions by type of scheme as reported to HMRC by providers for the yea
r.
Numbers: thousands Contributions: £ millions
6 April 2014 – 5 April 2015
Contributions
Employer sponsored schemes
Number of
members
Minimum
contributions
Individuals
contributions
1
Employer
contributions
Total
Contracted out members
2
140
0
100
280
380
Non-contracted out members
7,000
-
2,450
7,450 9,900
Non-employer sponsored
schemes
Contracted out members
2
with only minimum contributions
490
0
-
-
0
with minimum and other contributions
580
0
290
50
340
Non-contracted out members
3,740
-
6,180
3,220 9,400
Total
11,950
0
9,030
11,000 20,030
Footnotes
1.
Figures include basic rate tax relief repaid to scheme administrators by HM Revenue & Customs
2.
Number of members for contracted-out plans may include members with zero earnings who will not receive minimum
3.
Components may not sum to their total due to rounding.
“-” denotes nil or negligible or not applicable.
Source: Personal Pension Statistics, February 2016, HM Revenue & Customs
