‘Unable to rely on state pension’ Fears as over 50s hit by highest Covid redundancy rate

State pension: Retirement age 'likely' to increase says expert

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A growing number of people are at risk of being unable to afford a decent standard of living after retirement, according to a new report released today. The report, ‘What is an adequate retirement income?’ estimates a quarter of people approaching retirement, the equivalent to five million people, are at risk of missing out on the income they need.

The report by the Pensions Policy Institute, sponsored by the Centre for Ageing Better, warns millions of people in their 50s and 60s are running out of time to prepare financially for retirement.

The research found a low state pension, increasing unemployment and the transition to workplace pension schemes reliant on employee contributions are all factors leading to this risk.

It warns this is an immediate cause of concern for those currently in their 50s and 60s.

Not only that, but generations to come also risk being pushed into poverty if action isn’t taken to address financial insecurity in retirement, the report warned.

It found 90 percent of people of all ages with Defined Contribution pensions may be at risk of falling short on their expected retirement income.

Despite recent measures such as auto-enrolment having resulted in more people saving into their workplace pensions, savers aged over 50 spend less time in auto-enrolment schemes and consequently benefit less.

Most pension contributions remain inadequate, and challenges for savers have been exacerbated by COVID-19.

The report also highlighted that those aged over 50 had the highest redundancy rate during the pandemic and warns that this age group is more likely than younger groups to experience long-term unemployment.

Worryingly, increasing job losses and unemployment levels may result in the generation currently approaching retirement being pushed out of work and left with a pension that does not provide them a decent standard of living.

The report calls for a new consensus on what adequacy means, urging the Government to build a consensus between employers, industry, unions and individual stakeholders on what an adequate income in retirement is.

Furthermore, Ageing Better is calling on employers to match workplace pension contributions at a higher rate, as well as better support for groups at risk of financial insecurity.

Anna Dixon, Chief Executive of the Centre for Ageing Better, said: “The low level of the state pension in the UK, at just 24 percent of the national average income, means people are unable to rely on the state pension to provide an adequate income in retirement.

“Many people don’t have enough pension savings to support a decent standard of living in retirement.

“Further action is needed to ensure millions of people approaching retirement and generations to follow do not find themselves without adequate income in later life.

“While auto-enrolment is boosting the number of people saving for retirement, it is not sufficient to secure financial security in later life.

“We are calling on government and employers to do more to support people to achieve a decent standard of living in retirement and to boost pension savings for those approaching retirement.”

Daniela Silcock, Head of Policy Research at the PPI, said: “Changes in the way people work, save and retire mean that traditional measures of adequacy are not as relevant as they used to be.

“A new consensus is required to generate retirement income adequacy targets which people can use, and which allow for both income and liquid capital in retirement.

“Achieving a consensus will not be straightforward as it requires agreement from industry, employers and unions and the overall support of Government in order to ensure all key stakeholders play their parts.

“Therefore, action from the Government to pursue this agenda will be necessary soon, to help prevent future generations of older people experiencing poor retirement living standards.

“Under current adequacy measures, a quarter of people approaching retirement are unlikely to achieve a minimum acceptable standard of living in retirement and fewer than one in 10 can expect to achieve a comfortable standard of living.

“These stark figures underscore the urgency to develop relevant, accessible and achievable adequacy targets for those saving today, and for future generations.”

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