Finance Choices
Saving for old age is not income related
A major new study into the UK pensions market has found that millions of Britons not saving for a pension are held back by their attitudes and not their incomes.
Scottish Widows discovered that the differences between savers and non-savers go far beyond how much money people have in the bank, and while having no money will obviously stop people contributing to a pension fund, having lots does not mean people will save.
"Getting Britain to save more for retirement is not simply about income levels. By extension, the solution will not come simply by making savings products less expensive or simpler to understand," said Ian Naismith, head of pensions market development at Scottish Widows.
He added: "The major obstacle appears to be that [non-savers] can't see how they could reduce their spending to enable them to afford to save, and any solution proposed must tackle this issue. Whether or not compulsory saving is politically acceptable, and whether the experience in other countries has been positive are matters for the Pensions Commission."
One-in-three people who could be saving for their retirement, and are not, earn more than £30,000 a year the company found.
Scottish Widows also probed the psychological differences between savers and non-savers and discovered that even where savers and non-savers earn similar incomes, non-savers are more likely to believe that any reduction in their spending will seriously affect their standard of living. The pension firm points out that saving is not simply an economic choice, it reflects individual personalities and attitudes to the future.
The report found that while savers and non-savers had equal amounts of trust in the pensions industry, non-savers tend to be less content with their lifestyle and less optimistic about the future.
They are also more likely to have significant debts, less likely to own their home, and twice as likely to be smokers.
However, the pension firm also found that there is a wide acceptance that not saving will mean you will have to work longer, and one non-saver in three is prepared to work beyond 70.
Overall, Scottish Widows found that 55 per cent of the UK population is on course for an acceptable level of retirement income, although a large number of these people have defined contribution final salary pension schemes.
Additionally, the average amount of salary saved in the UK is 9.3 per cent, well short of the 12 per cent Scottish Widows believes is necessary for a comfortable retirement. Moreover, this figure is bolstered by a small number of "super savers" who put more than 20 per cent of their income in the bank.
Mr Naismith concluded: "While household wealth has increased, and attitudes to the onset and transition to retirement have changed, it remains a fact that 45 per cent of the working population who could, and should, be saving are not saving enough.
"This report dispels some of the myths surrounding saving for retirement - it is not just about income, it is about the psychology of affordability. It is not just about age, it is about priorities. It is not just about saving elsewhere, it is about not saving at all, consistently and habitually.
"The Government and the pensions industry must make rapid progress in their attempts to revive the voluntary approach to long-term saving. Within this must be consideration of income, age, attitude to retirement age and non-pensions wealth. What may be a more difficult goal will be understanding the psychology of habitual non-savers and identifying the triggers that may be required to change this situation."
Scottish Widows discovered that the differences between savers and non-savers go far beyond how much money people have in the bank, and while having no money will obviously stop people contributing to a pension fund, having lots does not mean people will save.
"Getting Britain to save more for retirement is not simply about income levels. By extension, the solution will not come simply by making savings products less expensive or simpler to understand," said Ian Naismith, head of pensions market development at Scottish Widows.
He added: "The major obstacle appears to be that [non-savers] can't see how they could reduce their spending to enable them to afford to save, and any solution proposed must tackle this issue. Whether or not compulsory saving is politically acceptable, and whether the experience in other countries has been positive are matters for the Pensions Commission."
One-in-three people who could be saving for their retirement, and are not, earn more than £30,000 a year the company found.
Scottish Widows also probed the psychological differences between savers and non-savers and discovered that even where savers and non-savers earn similar incomes, non-savers are more likely to believe that any reduction in their spending will seriously affect their standard of living. The pension firm points out that saving is not simply an economic choice, it reflects individual personalities and attitudes to the future.
The report found that while savers and non-savers had equal amounts of trust in the pensions industry, non-savers tend to be less content with their lifestyle and less optimistic about the future.
They are also more likely to have significant debts, less likely to own their home, and twice as likely to be smokers.
However, the pension firm also found that there is a wide acceptance that not saving will mean you will have to work longer, and one non-saver in three is prepared to work beyond 70.
Overall, Scottish Widows found that 55 per cent of the UK population is on course for an acceptable level of retirement income, although a large number of these people have defined contribution final salary pension schemes.
Additionally, the average amount of salary saved in the UK is 9.3 per cent, well short of the 12 per cent Scottish Widows believes is necessary for a comfortable retirement. Moreover, this figure is bolstered by a small number of "super savers" who put more than 20 per cent of their income in the bank.
Mr Naismith concluded: "While household wealth has increased, and attitudes to the onset and transition to retirement have changed, it remains a fact that 45 per cent of the working population who could, and should, be saving are not saving enough.
"This report dispels some of the myths surrounding saving for retirement - it is not just about income, it is about the psychology of affordability. It is not just about age, it is about priorities. It is not just about saving elsewhere, it is about not saving at all, consistently and habitually.
"The Government and the pensions industry must make rapid progress in their attempts to revive the voluntary approach to long-term saving. Within this must be consideration of income, age, attitude to retirement age and non-pensions wealth. What may be a more difficult goal will be understanding the psychology of habitual non-savers and identifying the triggers that may be required to change this situation."
posted by Bruce Wayne at 9:39 AM
Saving for old age is not income related
3 Comments:
For young people, the subject seems a long way off and not something that needs to be dealt with as a priority given the competing demands of education, finding employment, getting on the housing ladder and so on.
I agree with the previous poster. Most of my friends are more interested in buying a new car or going abroad on holiday than worrying about their pension. After all that won't matter for decades so why bother?
I just HAD to reply to this!
Having watched friends and family over the years, this subject can be broadened to saving in general. It has to do with ATTITUDE! I've known folks that had wealth given to them, just to watch it disappear over time. I had the same attitude (even though my father TRIED to teach me correctly) until one day the little light bulb went on and my attitude changed. I just wish I could figure out what finally caused me to see the light.....
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