The introduction of pension auto-enrolment later this year should be a “watershed moment” in tackling Britain’s savings gap, a new study suggests.
The report, Time to Act: Tackling our Savings Problem and Building our Future, published by the Association of British Insurers (ABI), claims that the workplace pensions shake-up will get at least seven million people into the savings habit.
According to the analysis, increasing an annual contribution from eight per cent to 12 per cent can boost a pension pot by 50 per cent.
And delaying starting to save into a scheme by five years could reduce a final pension by 17 per cent, the findings reveal.
Steve Gay, the ABI’s director of life, savings and pensions, said: “One in two people are not saving enough for their retirement, and many are not saving at all.
“Too many people are caught between a rock and a hard place: rising life expectancy makes the need to save for the future more important than ever, yet the tough economic times are understandably putting the squeeze on family budgets.”
The National Employment Savings Trust (NEST), said it is launching a campaign this month to raise awareness of auto-enrolment.
Graham Vidler, the trust’s director of communications and engagement, said: “We agree that making a success of automatic enrolment is the foremost challenge for the long term savings industry.
“NEST has been specifically designed to do just that, through, for example, a sophisticated investment approach designed to keep people saving.”
The ABI’s report is released as latest figures from the Pension Protection Fund (PPF) reveal the deficit in UK pension schemes hit a record high of more than £312 billion last month.
The PPF 7800 Index showed the deficit had increased by 44 per cent between April and May.
Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said the monthly index was “volatile”, but added: “Cash-strapped businesses that are already struggling to keep pensions going will have to find more assets to fill in the deficits.
“Quantitative easing and international investors seeking a safe harbour from the Euro storm have contributed to a sharp drop in gilt yields. That gilt fall has fuelled the deficit, which is more a reflection of accounting rules on pensions than any structural weakness.”
Free pensions guide: Click here
Twitter: My Finances
Join the conversation at #news_myfinances