10 May, 2016
Pension payout "won’t be adequate"
The former pensions minister under the coalition government, Steve Webb, has voiced his concerns about the eventual payout that savers will get from their pension in later life.
Despite deVere Group reporting on a number of worrying concerns about the health of the UK’s pension scheme in recent times, including certain age groups retiring a year later than usual, department store BHS’s liabilities and unfairness against women, Mr Webb has highlighted a different area that he fears for.
Instead, Mr Webb said that it is today’s workforce not dedicating enough of their paycheque to their retirement fund that is of great concern to him, with the issue set to affect more than 10 million people. He acknowledged that the automatic enrolment for pension schemes had been a good thing for British workers, although he said that they would be particularly disappointed to find out that their fund is nowhere near the required amount when they finally reach their retirement age.
People in the UK currently contribute 0.8% of their wage to their retirement, with this figure expected to increase to 4% by April 2019. Employer top-ups and tax relief will see that figure reach 8% in total, but Mr Webb says this is alarmingly small for people who begin thinking about their pension during their 20s and 30s. The advice of halving your age and contributing that amount as a percentage would see people in their 30s paying in just over half of the required amount, for example.
Therefore, a higher percentage of salaries need to be paid into retirement funds to make them viable, but Mr Webb believes any increase of contributions for the employee will just lead to people opting out of the UK’s pension schemes. However, if changes aren’t made soon then many could see themselves finally reaching their retirement age but not having the required amount to live their desired quality of life.
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