15 million people forced to work until they drop as they don't pay into a pension

A probe by the Financial Conduct Authority reveals a third of workers – roughly 15 million people – are not saving towards retirement

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Tricia Phillips

Millions of people don't pay into a pension (Image: Moment RF)

Millions of people face the prospect of working into their 70s or 80s to make ends meet amid a pensions timebomb.
A probe by the Financial Conduct Authority reveals a third of workers – roughly 15 million people – are not saving towards retirement.
Those who are depending on the state pension could be in for a rude awakening.
Writing in the Mirror today, FCA chief executive Andrew Bailey says: “Around 15 million adults who are not retired are not paying into a pension...
“While the state pension is a hugely important part of retirement provision... for many people it is not enough to maintain living standards.”
He adds the FCA’s largest ever survey into the nation’s personal finances, a poll of 13,000 people, shows “many are not saving enough for their retirement”.
The average amount being put away is 4.2% of earnings, experts recommend at least 12%.
The FCA’s report Financial Lives, due out today, comes as experts predict the pensions crisis will worsen.
With the population getting increasingly older, the state pension age keeps rising in a bid to reduce the escalating pensions bill.
The looming turmoil comes despite many people being automatically enrolled in workplace pension unless they have opted out.
Former pensions minister Sir Steve Webb said: “The good news is over eight million people have been enrolled into a workplace pension in the last five years.

“But many of these people are only putting a few pounds a week into a pension...
"Contribution rates now need to be steadily increased if people are going to be able to afford to retire.”
Pensions expert Tom McPhail, of brokers Hargreaves Lansdown, said: “For all the success of auto-enrolment..., it is worth remembering there are almost as many who have been left behind.”
Those with no pension pot may have to claim extra benefits, mean­ing more strain on public finances.

Saving for retirement is very important but it isn’t easy for people who have to make ends meet today.
Around half of 55 to 64-year-olds are expected to live to 90 but only 7% of them expect to live to this age. Many savers look forward to leisure early in retirement rather than worry about care costs later on.
Self-employed and unemployed people are, respectively, twice and three times as likely as those in jobs to have no savings.
It’s not all doom and gloom. There are early indications auto-enrolment by employers increases saving among those early in their careers.
And 97% of 18 to 34-year-olds contributing to a pension said it had been organised by their employer.
But 11% of those aged 18 to 24 and 13% of 25 to 34-year-olds missed paying bills or credit repayments in three of the last six months.

Auto Enrolment explained

This is what you need to know about automatic enrolment, who qualifies, how much you get and how to boost your pension further

• What is automatic enrolment? - A government initiative launched in 2012 to help more workers to save towards their retirement. Bosses have to automatically enrol staff into a workplace pension scheme and they both have to make minimum contributions.
• Who qualifies for AE? - Workers aged between 22 and state pension age, earning over £10,000. Some younger workers and those earning less may be entitled to join but will not be automatically enrolled.
• How much should I be saving? - For a comfortable retirement pension experts recommend you put away 12% to 15% of your salary.
• Can I save more than the legal minimum into my workplace pension? - It depends on the scheme your employer runs. Often firms let you save more and some generous bosses will match what you put in up to a certain percentage of your salary.
• What’s my state pension age? - Depends on when you were born. Currently it is age 65 for men and gradually increasing to 65 for women. From 2019 it will increase for men and women to reach 66 by October 2020. Then it will rise to age 67 by 2028. It continues to be kept under review so it may change.
• How much is the state pension worth? - Those who reached their state pension age before April 6, 2016, are on an old system that pays £122.30 per week. Those who reached it after April 6, 2016, come under the new version which is £159.55 per week for those with the full 35 qualifying years of National Insurance contributions.
• How can I save if I’m self-employed? - If you are under the age of 40 you can set up a Lifetime ISA. While you don’t get tax relief on contributions you will get a 25% bonus on savings from the Government.
  
  Culled from Pension Mirror