Are We Gazing Into A Pensions Abyss?
The good news - Britain's employees are optimistic that they will enjoy a stable and secure retirement receiving at least half of their pre-retirement income. The majority even expect to retire more than five years before normal retirement age.
The good news - Britain's employees are optimistic that they will enjoy a stable and secure retirement receiving at least half of their pre-retirement income. The majority even expect to retire more than five years before normal retirement age.
The bad news - This will not happen.
A new survey from management consultant, Towers Perrin carried out by MORI reveals that employees are blissfully ignorant when it comes to their financial future. Almost 90% of respondents expect at least a secure and stable retirement. Which 74% of respondents define as having at minimum 50% of their current income level as a pension. But fewer than half are making any additional retirement savings. Without this top up few, if any of those surveyed will hit this target. These are some of the key findings from the new research, which asked a 1005 company pension holders, employees of large companies with over 1000 employees about pension provision and their expectations.
Although 84% felt that they understood their options under their pension scheme at least fairly well, 41% no idea what their employer was contributing to their plan. Over a quarter were unsure of the minimum contribution required for their company scheme.
Perhaps even more worryingly almost 30% of respondents felt that they had no need to worry about their personal retirement provision as they would have the State pension to fall back on.
Robert Ivey, Head of the Financial Planning Group at Towers Perrin said: "Our research demonstrates just how complacent people are about saving for retirement. The inexorable move from final salary related pensions to defined contribution plans means a much lower entitlement for most people. Unless employees wake up to the realities and start making some serious additional savings, they are likely to end up with less than half what they think is necessary and a very shock when they reach retirement."
The survey reveals that people expect their employer to do much more than make contributions. Over three-quarters (78%) of respondents felt that their employer had a responsibility to help with their retirement planning. 78% said they would find it useful if their employer provided access to an IFA and almost half (41%) said that they would have more confidence in an IFA appointed by their employer.
The Rt Hon Frank Field, a well known commentator on the issue of pension reform said: "This new data makes clear the need for urgent action from the Government to help occupational pension schemes - the welfare success story of the last century. The Government's simplification review must produce results."
"People want to know that they have a decent minimum income in retirement above which they can make their own provision. A far-sighted Government would set out policies that would allow everyone ending a working life a retirement free from means tested benefits. Without real reform the coming decades will see ever more pensioners drawing means tested benefits."
The survey also shows that the level of ignorance of the new Stakeholder pension would appear to be higher among the very people for whom it was designed, those earning between 16315,000 - 16319,999. Almost half (49%) of respondents had never heard of Stakeholder, only a slight improvement on the 55% who knew nothing of Stakeholder when the survey was last conducted in 2000.
Technical details
Research carried out by MORI on behalf of Towers Perrin with a representative quota sample of 1,005 pension holder working in the private sector for a company with more than 1,000 employees who hold a company pension, aged 21 - 60 (women) and 21 - 65 (men). Interviews were carried out by telephone between 15 November and 4 December 2001.