Key points:
• 10% more savers unlikely to receive an adequate income in retirement as a result of the Brexit vote
• 75% of savers are now unlikely to meet their retirement income target
• Some savers will need to save up to 22% of their wages over a lifetime to have an adequate income in retirement
• Workers are likely to have to push retirement back to into their 70s to make up the shortfall
Commenting on the impact of a Brexit vote on pension savers, Chris Noon, Partner at Hymans Robertson said: “Our latest figures are dire reading for UK savers who are working towards their retirement. Before Brexit we were already in a situation where two thirds of savers were not saving enough for retirement and were set to have inadequate incomes during retirement. As a result of the referendum vote, this now goes to a level not seen before, with three quarters of savers set to struggle in retirement.
“Many savers are now faced with a difficult choice. In order to make up the difference they must either significantly increase the amount that they contribute to their pension or retire much, much later.
“As things stand, the average saver in a company pension plan is receiving 10% of their wages into their pension pot. Pre-Brexit, this already was not enough and savers really needed to be putting aside between 15 and 20% of their wages each year. Following the referendum, the level of contribution required is expected to increase significantly to the extent that we could see savers needing to contribute close to a quarter (22%) of their wages.
“On top of having to put more of their wages into their pension, savers are also facing the possibility of having to retire much later. Once again, before the Brexit vote, for many the average retirement age was set to increase from late 50s to late 60s. We are now likely to see this increase further to people reaching retirement in their mid to late 70s.”
Commenting on the future of pension’s policy, Noon summed up: “The future of long term savings in the UK really has moved from an amber warning to red. With a new Government in place and the UK set to leave the EU in the next two years, there is no better time to look at a way to work towards a strong long term savings plan.
“There are a number of parties that have a role to play in the future of this; the government needs to act on providing a long term view to pension policy, whilst employers have a key role in informing and working with their employees to improve pension saving. Savers themselves also have a role to play by taking a longer term view to their saving and looking further ahead and what they want their retirement to be like.
“Before the roles of any of those parties are defined it is vital that as an industry, we look at the issue of long term savings independently. We believe it is critical for a fully independent pensions commission to be created. Pension policy needs to be de-politicised and should not be seen as a way to boost HMRC revenues or treated as a political football.
An independent commission would strip the politics away and ensure that future policies and changes put the saver at the heart and make an adequate retirement income more achievable.”
*Hymans Robertson assessed over 500,000 DC members on their current contribution rates and the likelihood of them meeting retirement income targets as set out by the Pension Commission.
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