A new report by the Workplace Retirement Income Commission has warned that – even with new measures to boost savings – up to 14 million people will retire with inadequate pensions.
Both the public and private sectors have been grappling with the issue of footing the bill for pensions as Britons’ average life expectancy continues to rise.
Now a new report by the Workplace Retirement Income Commission – an independent body chaired by former Treasury select committee chairman Lord McFall – has warned that up to 14 million of today’s workers will retire with pension pots significantly smaller than those of their parents.
According to the report, many private sector workers retiring after 2020 can expect a bleak financial outlook for their old age – even with new reforms coming into effect that will force more workers to save for their retirement.
Lord McFall has set out 16 recommendations for creating a more stable, robust pensions system, including the establishment of an independent, standing pensions commission and companies offering free financial advice worth up to £500 to workers.
The report also acknowledged the challenges facing savers. In addition to impact of the recession on the value of pensions and the financial pressures facing savers, Lord McFall also suggested that private sector pensions are often confusing to workers, causing a lack of trust in the system.
In 2010, only 36% of private sector workers ages 16 to 64 were actively contributing to a pension. Over the past 10 years, the overall proportion of private sector workers paying into a pension has fallen – from 49% of men a decade ago to 38% today. Women saw a smaller decline, from 36% to 33% for the same period.
Workplace Pension Schemes
From next year, the Government hopes to automatically enrol workers earning over a certain amount into workplace pension schemes. However, Lord McFall has warned that up to 9 million could still opt out and find themselves without substantial savings for their retirement. A further 5 million don’t earn enough to qualify for automatic enrolment in the scheme – leaving a potential 14 million with inadequate pensions.
The findings will be given to the Government’s pensions minister, Steve Webb.
Moneyhighstreet comments: “Private sector workers need to pay more into pension schemes if they are to receive the benefits when they retire. But with savings being hit by rising inflation and stock market factors, pensions are no longer viewed as being as safe a bet as they once were.
“But there are funds out there that still provide a good return. It pays to seek advice from an IFA and examine the market to find the best pension scheme for your needs.”