Recently published research shows that millions of working age people in the United Kingdom could secure a financially comfortable life in retirement if they make minor changes to their saving habits.
The Department for Work and Pensions (DWP) found that 11.9 million people aren’t saving enough for their retirement. Half of those people have almost reached their retirement income target.
“The number of people classified as under-saving is defined by a replacement rate which measures retirement income as a percentage of working age income.”
The research pinpoints three key factors that lead to poor retirement preparation. The first is not having a full work history, which can reduce entitlement to the State Pension. The second is not contributing to private pensions while at work. Finally, not contributing enough is cited in the research, which is more typical of those in higher income brackets.
The Government recognises that this is an issue, which is what spurred many of the landmark reforms that have recently been made to the state pension system. These changes have been made to help reignite workplace pension scheme importance, education and interest. The introduction of the triple lock has also made a major impact. This is the commitment to increase the state pensions by whichever is highest of earnings, prices or 2.5 percent.
The research also revealed that people in middle and higher income groups are actually the worst financially prepared for retirement. These income groups actually face the biggest income hit when they stop working.
The research models how different increases could have different impacts on the number of people facing insufficient retirement funds. Experts have described this report as “extremely eye opening”.