Workers seeking retirement face a risky future ‘at best’ as today’s retirees live far more comfortably than those still working in the future, think tank warns
- Nearly 90% of mid-market private sector employees save less than recommended
- Those approaching retirement are also more likely to have higher housing costs
- Savers risk running out of money too quickly if they don’t manage their income
Workers hoping for a comfortable retirement face a risky future at best, a think tank warned.
Today’s retirees are living much more comfortably than those still working when they reach retirement age, according to the Institute for Fiscal Studies (IFS), which has sounded alarm bells about an impending pension crisis.
Nearly nine in ten middle earners in the private sector are saving less than the amount – 15 percent of their salary – previously recommended by the government’s pensions commission.
Those nearing retirement are also increasingly facing higher housing costs, according to the IFS.
An increasing number of people in their 50s and 60s approaching retirement live in more expensive private rental housing and are not homeowners.
Today’s retirees are living much more comfortably than those still working when they reach retirement age, according to the Institute for Fiscal Studies (IFS), which has sounded alarm bells about an impending pension crisis
Paul Johnson, the director of the think tank, pictured, said a fresh look at Britain’s pension savings system is long overdue
Experts have warned of pension shortfalls, with incomes falling over the next decade.
This is because a growing number of people are retiring on modern occupational pensions and fewer people have generous defined benefit pensions, which provide guaranteed income through retirement.
Most employees are now saving for “defined contribution” pensions – which are like a pot of money that you and your employer put into each year and that you can access starting at age 55.
However, these are less economical and safer than older schemes.
Savers risk running out of money too quickly if they don’t carefully manage their income.
The IFS said, “While today’s retirees continue to do well on average… the future looks risky at best for many current workers hoping for a comfortable retirement.”
Paul Johnson, the director of the think tank, said a fresh look at Britain’s pension savings system is long overdue.
The IFS has launched a Pensions Review, which will run for two and a half years, assessing future risks and determining the actions to be taken.
Labor former chancellor Alistair Darling, pictured, who is now chairman of the independent charity Abrdn Financial Fairness Trust, which works with the IFS on the review of pensions, warned that too many people were not saving enough for retirement
Mr Johnson said: ‘Automatic enrollment has brought millions in pensions to the workplace, all too often at much lower savings than the Pensions Commission thought would be necessary.
“Most private sector workers have significant risks to manage, not least about the duration of their retirement.”
Former Labor Chancellor Alistair Darling, who is now chairman of the independent charity Abrdn Financial Fairness Trust, which works with the IFS on pensions review, warned that too many people are not saving enough for retirement.
“While today many retirees are doing well on average, we need a major overhaul to avoid a future where too many retirees will not have enough to live on in their old age,” he said.