Pension Savings - The Problem
According to a new report from the Organisation of Economic Co-operation and Development (OECD) the UK's State Pension provides just 29% of average earnings. This is the least generous of all of the most advanced economies in the world. After pension savings in employer sponsored pension schemes and personal pensions are taken into account this increases to 62% of average earnings. However this is still lower than the OECD average of 69%.
There is a simple solution to this which is for individuals, employers and governments make more pension savings. The problem is that most individuals do not understand the need to make additional pension savings so are not:
- making additional pension savings themselves
- asking their employers to contribute more or
- even less likely demanding that the government increase tax to fund better State Pension
Pension Savings - The Solution
Corporate Benefits' believe that to solve this fundamental problem significant investment should be made to educate individuals on the need to make additional savings for their retirement. For this to be successful it will require action by the government, employers and the retirement saving industry. It would also help if the media, who are good at exposing poor practice, could put a more positive spin on the benefits of pension saving.
It is important that individuals set retirement goals. Then establish a savings habit. The earlier the age at which this is done the better the prospect of success. Progress should be regularly reviewed against these goals. Action must be taken or expectations adjusted if savings are not on track. Changes to personal circumstances and actual experience will require adjustments to contribution levels and or investment strategy.
Employers can assist in this process by providing their employees with access to advice through the workplace. The government have introduced a non-taxable benefit allowing employers to reimburse employees for any costs incurred (up to £500 p.a.) in receiving advice or guidance related to their pension.