A generational shift in attitude is evident as only half (50%) of those aged 18-24 believe pension saving should be compulsory. The jump to 78% supporting compulsory saving for adults aged 55 and over suggests regret at missed opportunities to save earlier in life and that, for Brits, the reality of retirement is biting late.
Views varied regarding the level of savings considered adequate, but again there was a gulf between younger and older generations, highlighting the potential perception gap that exists between what people think is sufficient for a comfortable retirement, versus what may actually be necessary.
When looking at combined contributions (from themselves and their employer) 21% of workers felt that the total amount that should be saved was at least 11% of their monthly salary. However, 11% of 18-24 year old workers thought that just 1-2% of their total monthly salary was enough to give financial security in retirement. The proportion who felt 1-2% of their monthly salary was adequate fell to just 2% for those workers aged 45 and over.
Across all ages, a quarter (25%) of workers said they did not know what they thought the minimum combined contribution should be.
If the UK were to fully embrace compulsion it could mirror the Australian model, a system of compulsory contributions from both employers and employees. Australian savers are also encouraged to supplement their compulsory contributions with further, voluntary contributions. Greater compulsion, possibly with a limited flexibility to opt down and not just opt out, would bring significant benefits and mean higher default saving levels for the UK’s future pensioners.
Bob Scott, senior partner at LCP, said: “Our research suggests that people on the whole support compulsion in retirement savings to help them achieve greater financial security.
“Auto-enrolment has been hugely successful in getting millions more people saving for their retirement. But there is still some way to go. Auto-enrolment does not include low earners or the self-employed which means that there are still more than 10 million private sector workers who are excluded. Rates of opt-out have generally been lower than expected, which we hope will continue to be the case when contributions rise in April 2019. In the longer term, government should also plan for contributions to rise significantly above 8% of qualifying earnings.
“Whilst we were relieved that Chancellor Philip Hammond resisted the temptation in the Autumn Budget to tinker with changes to pensions taxation, we would urge the government to commit to policies that ensure meaningful levels of retirement savings. Making pension saving compulsory could move things forward.”
The survey also asked those who thought pension saving should be compulsory what the minimum employee contribution should be. 43% thought that the minimum someone should personally pay into their pension was 3-5% of their monthly salary, while around a quarter (26%) thought the minimum contribution should be 6-10%.
The survey results, based on a representative sample of 2,008 British adults, are the latest in a series of insights released as part of the Future Pensioner campaign from LCP.
The campaign seeks to shine a light on the state of pensions and retirement savings in the UK, and raise awareness of and debate around key elements of ensuring the pensioners of tomorrow make better decisions today.
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