More than 11.6 million UK workers could struggle to afford even basic living costs in retirement, according to new research from Scottish Widows.
The study, ‘Retirement Realities: Unlocking the Workplace Benefits’, found that 34 per cent of employees are on track to fall short of meeting essential expenses later in life. The findings are based on the insurer’s National Retirement Forecast (NRF), developed with Frontier Economics, which models outcomes for people aged 22 to 65 based on savings and spending behaviour.
While most full-time employees are contributing to workplace pensions, boosted by higher wages and auto-enrolment, one in five (20 per cent) are still likely to experience retirement poverty. However this figure is considerably worse for those working part-time, many of whom earn below the £10,000 auto-enrolment trigger, so may be outside of workplace pensions, which account for 63 per cent of employees’ retirement income according to Scottish Widows.
Scottish Widows says that low engagement with workplace pensions is also contributing to this problem. More than a third (38 per cent) of workers have little or no understanding of the pension benefits offered by their employer. This is despite nearly half of employers providing regular information and guidance to staff.
Employee understanding was lowest in small firms, where 41 per cent of workers lack pension awareness, compared with 38 per centin large companies.
Graeme Bold, managing director of workplace and intermediary wealth at Scottish Widows, said engagement remains the biggest barrier to improving retirement outcomes. “A workplace pension can be the most powerful tool people have to shape their financial future, but low engagement is holding people back from taking their best shot at long-term saving,” he said.
“There’s a broader opportunity for pension providers, employers and those managing employee wellbeing to help people make the most of this workplace benefit. The government must also look at supporting part-time workers and lower earners with the expansion of auto-enrolment.”
The report calls for an increase in default contribution rates to reflect the rising cost of living and greater collaboration between employers, providers, and policymakers to boost engagement with workplace pension schemes.
