Are you saving enough into a pension? These groups are officially ‘under-pensioned’
New research reveals almost three million Britons are not saving into a workplace pension. What’s more, this figure has risen by a staggering 300,000 in the space of a year. So which groups are officially under-pensioned, and why? Let’s take a look.
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What does the research reveal about pensions?
According to NOW: Pensions, ‘under-pensioned’ groups typically have just 15% saved in their pension pot compared to the UK average. The total number of people that are part of this group is officially 280,000.
Strikingly, the report suggests that 81% of carers, 21% of disabled people and 23% of women do not qualify for an auto-enrolment pension. Part of the reason is that many don’t earn above the £10,000 ‘trigger’ to be automatically enrolled.
Sadly, the report also reveals that those with disabilities have private pension wealth of £7,450. This is just 9% of the average private pension in the UK.
On a similar note, those with more than one job often struggle to build up a decent amount of pension wealth. That’s because the average pension of someone with multiple jobs stands at £2,650. This is a tiny 3% of the national average.
According to the report, income levels dropped more for ‘under-pensioned’ people over the past year due to the impact of Covid-19 on their ability to keep on top of bills, savings and debt repayments. The report also notes that many of those who are under-pensioned are more likely to have been affected by reduced furlough income and redundancies last year.
Which groups are officially under-pensioned?
According to the report, the following seven groups have private pensions far below the UK average. For comparison, the average median pension wealth in the UK stands at £80,690.
- Carers (£29,800)
- Divorced women (£26,100)
- Single mothers (average median private pension wealth: £18,310)
- Disabled (£7,450)
- Multiple jobholders (£2,650)
- BAME (£0 – most people in this group do not contribute to any pension saving)
- Self-employed (£0 – most people in this group do not contribute to any pension saving)
What are the positives from the report?
While the report paints a bleak picture for those who are under-pensioned, its writers do acknowledge that the auto-enrolment pensions scheme, first introduced in 2012, has been a ‘good start’ with regards to tackling pension inequality. Despite this, the report highlights that the current system doesn’t necessarily suit those with non-typical working patterns.
The report says, “Auto-enrolment has been widely praised for its success in bringing more people into pension saving in the UK, yet there are millions of people still missing out.
“The policy was designed for traditional patterns of work and isn’t geared to help employees who take significant career breaks, work in multiple or part-time roles, or move frequently between jobs.
“This exacerbates the widening savings gap and later life inequalities experienced by the most financially at-risk groups, many of whom are more likely to be excluded from auto-enrolment.”
To address these concerns, the report suggests the government removes the £10,000 earnings trigger that currently applies to auto-enrolment pensions.
On a more positive note, the report welcomes the fact that auto-enrolment has closed down previous gender gaps when it comes to pension savings.
Samantha Gould, head of campaigns at NOW: Pensions, explains, “Thanks to automatic enrolment, the latest figures show the number of women who benefit from a workplace pension is equal to the number of men.”
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How do you know if you’re saving enough into your pension?
As the report reveals, a large part of the UK population has pension pots far below the national average.
However, it’s worth knowing that there’s no set figure regarding how much you should save into your pension. That’s because how much you should save depends on a number of variables.
Some of these variables include how luxurious you expect your retirement to be, the age you hope to give up work, and whether you plan to be a homeowner in your later years.
For more on this, see our article that explores how much Brits are expected to have saved in their pensions.
The post Are you saving enough into a pension? These groups are officially ‘under-pensioned’ appeared first on The Motley Fool UK.
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