60% of Women are likely to face a poor retirement.
Scottish Widows have just published their annual pensions report, which looks at the nation’s retirement savings trends.
The amount of women saving adequately for retirement is at an all time low. Only 40% are saving enough to ensure a comfortable retirement and 1 in 5 are saving nothing at all. Just 36% of women under 50 are saving enough (more than 12% of income); this has fallen from 40% last year. Women over 50 are better with 49% saving enough, which is up from 46% last year.
The state pension is due to move to a flat rate of £140 a week.
Can you live on that? More to the point, would you want to try and live on that? What would you have to give up?
Here are some statistics that came out of the report;
The average British worker anticipates stopping work around age 66 and is looking for retirement income of £25,000 a year. That would require savings of £1,000 a month from age 30.
Someone earning £25,000 and saving 12% of earnings would be likely to see a fall of over 50% in their income after retirement. Are you saving 12% of your earnings towards retirement?
Starting to save at 20 rather than 30 could add 39% to retirement income. Deferring retirement from 65 to 70 could add 43%. Increasing contributions by 3% of earnings every five years could add 68% to your retirement income.
Only one in three of those aged 60-64 is currently working, and that falls to one in five between 65 and 69. Women, in particular, appear to see reaching state pension age as a trigger to retire.
Where you work makes a big difference to how adequately you are saving for retirement with the public sector fairing best at 59% of employees saving enough. Small business owners and the self-employed are likely to have the poorest retirement with 39% of employees in a small business and just 33% of the self-employed saving adequately.
The worst industry sector for retirement savings is the creative sector, which includes media, advertising, PR, marketing and sales, with only 35% saving adequately and a massive 50% saving nothing at all or less than 6% of their earnings.
So what can you do to ensure you are not going to live in poverty at retirement?
Start saving something now. Something is better than nothing and even if money is tight, saving a little will make a difference.
Once you get into the habit of saving it becomes easier and you find that you become accustomed to living on a little bit less each month and saving some.
If you are employed, find out about joining your employer pension scheme. By 2018 all employees will be enrolled into an occupational scheme and will have to pay a minimum of 4% of their income, with their employer paying 3% and 1% tax relief. This is still not enough and you need to be putting away at least 12% of your income.
Most larger firms will already have schemes in place where they match your contributions up to a certain level. If you don’t take advantage of this, you are in effect giving up a pay rise from your employer.
Pensions are not the only method of saving for retirement but they are an important part of your retirement portfolio. I will discuss the different options available for creating an income in retirement in my next blog.