Half of pension savers are afraid they will NEVER be able to pay their pension

More than half of people who save for retirement think they’ll never save enough to stop working when they get older, new research shows.

The gloom about never being able to retire was almost as prevalent among homeowners—many of whom struggled with rising mortgage payments and other household bills—as it was among retirement savers more broadly.

According to the Living Wage Foundation survey, some 39 percent of homeowners fear they won’t save enough for a comfortable retirement, and 34 percent fear they won’t even be able to cover basic living expenses.

Meanwhile, 8 percent of home-owning retirement savers have stopped or reduced pension contributions in the six months to February 2023, the report found.

The campaign group is trying to tackle low pension savings levels by promoting the ‘Living Pension’ and attracting employers who are willing to contribute more to employees’ pensions than the mandatory minimum rates.

Under automatic enrollment, employers must put a minimum of 3 per cent of your income between £6,240 and £50,270 into your pension, while employees contribute 4 per cent and the government adds 1 per cent in tax relief.

However, many employers are willing to pay a 4 percent, 5 percent, or 6 percent premium if you choose to save a larger portion of your income for retirement.

Who pays what: Automatic breakdown of minimum pension contributions for taxpayers at the moment

The Living Pension campaign is pushing for an increase in the overall savings target from 8 percent to 12 percent overall.

And she is trying to convince employers to increase their contribution from 3 percent to 7 percent for all directly employed personnel, regardless of age and income, and in time also for hired personnel from third parties.

The Living Wage Foundation says survey results on people’s fear that they will never be able to afford to retire show that even homeowners struggle to save and plan for the future.

Direct Katherine Chapman says, “Low-wage homeowners will feel the pressure the most, and the cost-of-living crisis is making it even worse. Under pressure from the sharply rising mortgage, food and energy costs, homeowners will find it increasingly difficult to set aside money for retirement.’

The Living Wage Foundation’s research shows that 54 percent of homeowners who contributed to a retirement in the 12 months to February 2023 don’t believe they’ll ever stop working.

That compared to 56 percent of those surveyed overall.

The foundation surveyed 3,059 working adults who pay a pension, weighted to be representative by age, gender and region. About 1,973 were homeowners, 848 renters, 216 lived with their parents, and 22 listed “other” as their housing status.

> How much do you need for a simple, moderate and comfortable retirement?

The foundation’s Living Pension campaign has prompted employers to endorse their voluntary savings goals since its launch in March 18.

They are: Aviva; Phoenix group; Herbert Smith Freehills; make rich; Surgeons’ Quarters Edinburgh; digital deployment; FieCo Accountancy and Marketing Ltd; Sporty; Smart Meter Assets; Ticket to Ride Highlands; EMB group; Virtual assistant behind the scenes; Coastline housing; Young Scot; Young Hammersmith and Fulham Foundation; My life my choice; Good Things Foundation; Citizens UK.

That compares to the 13,000 employers the country signed up to pay workers the living wage, which was launched in 2001.

The group’s UK Living Wage for outside London is £10.90 per hour, and the London Living Wage is £11.95 per hour. These rates apply to all employees over the age of 18, which the foundation says recognizes that young people face the same cost of living as everyone else.

The government’s official national living wage for those aged 23 and over and the national minimum wage for those of at least school age are below. These are the current rates and they increase every year in April.

‘I have no choice but to sell my house’

The Living Wage Foundation interviewed savers about their struggles to pay for their retirement to highlight the pressures many people are under.

Widow Eva, aged 65, is selling her property to cover her expenses as she approaches state pension age. She says, “I’m taking my state pension because I can’t afford not to. I plan to keep my job and am looking for more hours but not having much luck.

“I am in the process of selling my house and downsizing it to a small shared ownership property. This frees up some equity, making it financially easier for the future.

“I have no choice but to sell my house and find a smaller house. My house is an old house with four bedrooms and two living rooms, it’s a lot to heat and maintain, and since I live here alone, it makes sense to move to a smaller house.

‘My partner passed away almost three years ago and we had been together for over 43 years, but never married. As a result, I was not entitled to a widow’s benefit.

“We had savings, but I’ve used up almost half of it in the last three years and that’s just paying bills, buying food and doing the normal things everyone does.

‘I’ve had two holidays, but I haven’t bought any new furniture etc. My AOW will make the difference. I earn £100 a week and receive a monthly working pension of £117. My state pension will be £206 a week so it will help.’

‘Status pension is not nearly enough’

Homeowner Sarah, who is in her 50s, says the closer she gets to retirement age, the more she comes to believe she’ll never be able to fully retire.

‘I have worked hard all my life, I own my house with the help of a mortgage, but the cost of living and relatively low income over the years has meant that there is a lack of disposable income to save for retirement , and the state pension. is nowhere near enough to meet even the basic requirements.

“Things have gotten even worse for my generation as we are currently hit by high mortgage interest rates and higher bills for our basic needs.

And yet salaries have not risen in line with this and it is important to note that women’s salaries are often significantly lower than men’s.

“Retirement age has also risen, giving me less time and less money to enjoy my life before I die. It is a very bleak prospect and I feel we have entered a time where ordinary people will be forced to work until they die and there is no such thing as ‘retirement’.’

How do you arrange your pension if you are afraid it will fall short?

1) If you’re worried about whether you’ve saved enough, research your existing pensions. Broadly speaking, you should ask schematics the following questions.

– The current fund value.

– The current transfer value – as there may be a penalty associated with a move.

– Whether the pension is part of a final salary or defined contribution scheme. Defined Contribution Pensions take contributions from both the employer and employee and invest them to provide a pot of money at retirement.

Unless you work in the public sector, they have now largely replaced the more lavish gilt defined benefit – average career or final salary – pensions that provide a guaranteed income after retirement until your death.

Defined-contribution pensions are more meager and savers bear the investment risk, rather than employers.

– Whether there are guarantees – for example a guaranteed annuity – and whether you would lose them if you moved the fund.

– The pension projection on retirement age. You can use a retirement calculator to see if you have enough. These are available online everywhere.

2) You need to add the forecast figures to the amount you expect to receive in state pension, which is currently £203.85 a week or about £10,600 a year if you qualify for the full new rate. Request an AOW forecast here.

3) If you’re tempted to pool your old pensions, read our guide first to make sure you don’t get fined.

4) If you have lost track of old pots, you can use the The free government pension tracking service is here.

Be careful when searching online for the Pension Investigation Service, as many companies with similar names will appear in the results.

These also offer to look for your pension, but try to charge or flogging you for other services, and this can be fraudulent.