Insurer MetLife Europe recently carried out a study into the saving habits of those nearing retirement. The results were startling, with only one in four people over 50 stating they were happy with their pension options and confident they would be financially comfortable when they retired. Of those who had not resolved their retirement planning, one in three workers had not begun to save for retirement at all.
Consequently, MetLife’s study found that over four million people intend to work beyond the state retirement age, as they can’t afford to retire. The government, which has admitted it can no longer afford to pension everyone at 65, has reacted by raising the statutory age of retirement and removing the legal loophole which allowed companies to pension people off at 65. This will allow those who have no finances to work into their 70s if required.
The study highlights the need for sound retirement planning and independent pension advice early on in life, with many over 50s now facing years of sacrifice to save enough for a comfortable retirement. The ideal target for a retirement pension is thought to be two-thirds of an individual’s final salary.
The National Employment Savings Trust (NEST) scheme being rolled out by the government over the next few years will see the majority of employees auto-enrolled into private pension schemes. This will essentially mandate sound financial behaviour and is intended to safeguard the beginnings of a decent retirement fund, in addition to the state pension each NI contributor receives.
Whether NEST can do enough to offset such a large deficit of private pensions in the UK remains to be seen.