A new report published by Scottish Widows has revealed that, while confidence is beginning to return to the UK pensions market, with savings figures up from 2006, only 49% of consumers are saving adequately and 24% are not saving at all.
The Scottish Widows UK Pensions Report, which was first launched in 2005, uses two key measures to monitor pensions savings behavior in the UK: the Scottish Widows Pensions Index and the Scottish Widows Average Savings Ratio.
The Scottish Widows Pension Index, which tracks the percentage of eligible consumers – i.e. those aged over 30 and earning at least GBP10,000 a year –
saving adequately for retirement, has risen from 46% in 2006 to 49% in 2007.
The Scottish Widows Average Saving Ratio, which tracks the percentage of income being saved for retirement by UK workers not expecting to get their main retirement income from a defined-benefit scheme, rose from 5.8% to 7.9% – back to the level seen in 2005. Although the ratio figure has risen, it still falls significantly short of Scottish Widows’s recommended target savings ratio of 12% of earnings.
While confidence seems to be returning slowly to the pensions market, 51% of those who should be preparing for retirement are still not saving adequately, commented Ian Naismith, head of pensions market development at Scottish Widows. Despite pensions being front page news for much of the past year, there is still some way to go before the nation is truly on track – when you strip out those people that are relying on final-salary schemes, three-quarters of the UK population is still not on track for a comfortable retirement.
The Scottish Widows UK Pensions Report 2007, reveals that someone saving adequately for retirement is likely to be male, working in the public sector, over 50, or earning over GBP30,000. In contrast, a non-saver is more likely to be female, a parent, in debt, or self-employed.
The Scottish Widows report also reveals that 24% of those who could and should be preparing for their retirement are not saving at all into any form of pensions savings vehicle. This is down on 2006 (28%) but still higher than in 2005 (17%).
Furthermore, confidence continues to fall as, although more people are saving adequately than in 2006, almost a third of savers (32%) do not know what their main source of income will be in retirement. This is matched by a continued fall in people that believe a final salary scheme (defined benefit) will provide them with most of their income. This has dropped from 35% in 2006 to 32% in 2007.