Nearly half of adults are failing to save enough to retire comfortably.
According to the latest report into pensions from Scottish Widows, almost half of today's workers aren't saving enough to retire in comfort.
Since 2005, Scottish Widows -- owned by Lloyds Banking Group (LSE: LLOY) -- has published a yearly UK Pensions Report into the state of Britain's retirement planning. Alas, its 2011 UK Pensions Report makes for uncomfortable reading.
The insurer -- famous for its 'widow in black' adverts -- claims that almost half (49%) of adults who should be saving for retirement are failing to do so adequately, putting aside less than 12% of their income. This proportion lies exactly in the middle of the 46% to 52% range established by Scottish Widows in its six previous surveys.
What's more, the insurer found that one in five adults is failing to make any provision at all for their retirement. Unless members of this group wake up and smell the roses, they face a retirement funded solely or largely by the creaking state pension system.
Scottish Widows found that we want an average income of £24,300 a year to live comfortably at age 70. To be honest, this is unrealistic for many people, as it amounts to 96% of the average salary of £25,400 a year. What's more, to generate an annuity of this size would require a pension pot worth at least £400,000.
Clearly, we Brits need to start being more realistic about our retirement goals. That said, without a mortgage, other debts or dependants, a couple could live quite comfortably in retirement on, say, a combined income of £18,000 a year.
The ostrich generation
Scottish Widows argues -- quite correctly -- that everyone aged 30 or over who is not retired and earns at least £10,000 a year should take steps to prepare financially for retirement.
Indeed, close to three-quarters (73%) of the 5,200 adults interviewed online by YouGov in March understood the need to take personal responsibility for their future. Nevertheless, Scottish Widows found 'widespread and ingrained inertia' when it comes to retirement planning.
For example, those interviewed claimed that they could, if pushed, put aside an extra £97 each month towards saving for the long term. Sadly, they fail to do so, which suggests that we are turning into an 'ostrich generation'. Put simply, when it comes to pensions, we'd rather bury our heads in the sand than face up to our frugal futures!
Sacrifice £58 a month
For workers on the average salary, Scottish Widows calculates that saving an extra £58 a month -- 2.7% of their pre-tax salary -- would boost their savings rate from the average of 9.3% to the 12% needed to secure a decent retirement. In effect, that's like giving up a cup of coffee a day to build a brighter future.
Then again, although the spirit may be willing, the wallet is weak. One in nine respondents to this survey (11%) said they would opt out of NEST (National Employment Savings Trust), the new government-sponsored pension plan being introduced next year.
Lower your expectations
To be honest, I can understand public wariness when it comes to pensions.
For most of us, payroll taxes gobble up close to a third of our gross pay, making it increasingly difficult for those on low and middle incomes to save for retirement. On the other hand, pension contributions attract tax relief, enabling us to claw back some of our income tax to put aside for retirement.
Finally, Scottish Widows found that the average age British workers would like to retire at has remained unchanged, at 61 years and eight months. Again, this will be a pipe dream for many workers, especially given that the state pension age heads relentlessly towards 70.
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