If you’re worried about whether or not you’ll have enough money to retire comfortably then you’re certainly not alone.
Earlier this month a report from the Pensions and Lifetime Savings Association (PLSA) made for shocking reading, or at least to this Fool’s eyes. The trade association said that around four out of every five respondents to its latest survey could not be certain that they are saving enough for retirement. Put another way, this means that 30.4m members of the working population don’t have the peace of mind that they will be able to live out their autumn years in the sort of comfort they desire.
Not saving enough
Look, I’m not judging this lackadaisical approach that many have towards formulating a rock-solid retirement plan. I don’t buy into the headlines put out by the likes of the Daily Mail speculating on the vast amounts that millennials spend on avocado toast and other modern luxuries.
Rents are high, wage growth is sluggish (at best) and over the past couple of years has lagged some way below the rate of inflation.
However, the PLSA’s release showed that it is Britons’ uncertainty over what they will actually need to live off once they stop working that is stopping many of them from stashing more away, not a lack of available capital. Of those that responded to the latest survey, 34% said that they could afford to save more but didn’t because of this reason.
Auto-enrolment could prove insufficient
Needless to say this is an exceptionally risky strategy. As my Foolish friend Harvey Jones recently spelled out, the state pension clocks in at just £8,456, a long way short of the average full-time wage.
The government has tried to help people save more by introducing the automatic enrolment system for workplace pensions, and right now this is the main way that people in the UK are saving for retirement. While a huge step in helping reduce millions plunging themselves into retirement poverty, it seems as if many could still be unknowingly underfunding their nest egg.
The minimum contribution level for auto-enrolment pensions currently stands at 5% and is set to rise to 8% next year, the minimum amount which the government assumes pensioners will need to survive on. But more than half (51% in fact) of those replying to the PLSA’s survey wrongly believed that this was the recommended amount to be saved, while 44% thought that this would be enough to ensure a comfortable retirement.
Don’t bury your head in the sand
I don’t know about you, but I plan to be considerably richer by the time I pull the plug on work, not much, much poorer. And that means that we should all carefully consider whether we are saving enough to fund the sort of lifestyle we want later in life.
You might not like the answer but there’s no point putting off the inevitable. Besides, on the plus side it’s never been easier to begin building a formidable investment portfolio given the broad array of investment devices available to us and the ubiquity of sound investment advice from experts like The Motley Fool.
