Figures released today show that almost half the population aged below retirement age had no private pension savings in 2010-2012.
New figures show that almost half the population aged below retirement age had no private pension savings in 2010-2012
Few people in Britain today are able to enjoy the quality of life they would like in retirement if they have to live on the state pension alone.
And, despite the ‘triple lock’ that guarantees the state pension will increase in line with whichever is the highest – average earnings inflation, price inflation and 2.5 per cent – that is likely to remain true in the future.
If people want to live a comfortable life in retirement, they will need to save into a private pension.
However, figures released today by the Office for National Statistics show that almost half the population of Great Britain aged below retirement age – 45 per cent of men and 49 per cent of women – had no private pension savings in 2010-2012.
These figures are a bit exaggerated because they include young people from the age of 16, some of whom will not yet have started work. But if we only look at people aged between 25 and retirement age, it is still the case that just under 40 per cent do not have any private pension savings. This is a truly shocking statement.
Deeper analysis shows that a person is more likely to have pension savings if they are older, have higher qualifications, work as a manager or in an intermediate role, have relatively high earnings and are in the public sector. People with pension saving are also more likely to have other forms of wealth, particularly property wealth.
Young people with few qualifications doing low-paid routine work in the accommodation and food services industries and in administration and support services are least likely to have pension savings.
The industrial analysis reveals the most striking differences in proportions of people with private pensions. Fully 95 per cent of people working in the accommodation and food services industries do not have a pension; and the same is true of 85 per cent of men and 87 per cent of women in administration and support services.
At the other extreme, over 90 per cent of people working in public administration, defence and social security have a private pension.
These figures are based on the ONS’s Wealth and Assets Survey, which covered the period from July 2010 to June 2012. Therefore, they pre-date the introduction of automatic enrolment, which requires employers to automatically enrol staff into a pension scheme, starting with the largest employers in October 2012.
They will, therefore, act as a benchmark by which to judge the success of this policy. If it is working, future surveys will find smaller proportions of people with no pension savings. Early indications are that opt out rates among employees who have been automatically enrolled into a pension are lower than anticipated, suggesting there is some hope of a successful outcome.
Of course, it is one thing to have private pension savings and another to be saving sufficient to build up a large enough pension pot to make a real difference to life in retirement. Critics of auto-enrolment argue that contribution rates are too low.
The recent growth in the proportion of working people who are self-employed might also negatively affect pension saving. The ONS’s analysis found that 46 per cent of men and 50 per cent of women who are self-employed had no private pension, compared to a third of employees.
The shift into self-employed, therefore, is likely to mean fewer people with a private pension.
Tony Dolphin is chief economist at the Institute for Public Policy Research (IPPR)
To reach hundreds of thousands of new readers and to make the biggest impact we can in the next general election, we need to grow our donor base substantially.
That's why in 2024, we are seeking to generate 150 additional regular donors to support Left Foot Forward's work.
We still need another 124 people to donate to hit the target. You can help. Donate today.
9 Responses to “Too few people in Britain have a private pension”
Leon Wolfeson
And less and less will, as wages fall. Moreover, most of the “pensions” out there are so poor that people will never see what they put into them again. Automatic enrolment is likely to be a major driver of poverty, no more.
The answer is (gasp) decent pensions, like most of the EU. Not the terrible pensions on offer. And decent wages.
(Or a basic income, that solves SO much)
Bob Mk
First need is for a house with a mortgage paid off. But getting a house is very difficult for many and that same group can ill afford to pay into a private pension.
The article should state the minimum gross salary the writer thinks is required to contribute £200 per month into a private pension. That sum over 30 years gives total pay in of 72K. The income from such a pension would probably not pay the rent! We need social housing on a massive scale with rent to buy schemes.
I own my house. I downsized. I live off slightly less than full state pension plus around £150 per month from savings. If I was paying rent I would be facing hardship. But no rent means I am fine. Young people need same opportunities I had – or better!
PT
On the contrary, many people are wise enough not to waste their money on very poor value private pensions – a value that will only get worse as we enter a sustained period of lower growth and lower rates. BTL property is currently the best bet, and will likely remain so for a long time. In fact, the value of BTL is expected to surpass private pension in 3-4 years time.
carefix
Saving into a pension fund is a very bad idea at the moment as the global financial system is nearing its end. The government will do everything it can to prop up the system via the bail in of banks using creditors (depositors) money and confiscating private pension funds or parts thereof. When the system goes down completely and the currency collapses all bank savings will be wiped out. Private companies will be recapitalised in a new currency otherwise the economy will stop. The government are keen to minimise this cost so they are encouraging people to take all their pension funds as a lump sum. Private individuals will not of course get any significant re-capitalisation and so will lose this lump sum if it is held in the form of paper with counter-party risk, e.g. cash. They will have to re-capitalise annuity providers and so while annuities are extremely bad value they are a better deal than the complete theft the government are planning through their seemingly generous reform of the private pension system.
Guest
No, people need affordable accommodation. There’s a difference.