The Scottish Widows Retirement Report is now in its 14th year and is always a good barometer of whether people are saving enough for their old age.
With the 2018 one recently out, it is a mixed picture.
More young people are getting the message but overall levels have stalled.
The Report hails the great leap forward that auto enrolment produced but maintains much more needs to be done if the system is to become truly fit for purpose.
At 55 per cent, the proportion of UK workers saving adequately for retirement has dropped slightly for the first time since 2013, falling from 56 per cent. The West Midlands is higher but not by much – 57 per cent.
The Report bluntly states: “Despite adequate savings rates having risen by 10 per cent since auto-enrolment was introduced in 2012, the stall in recent years demonstrates that a renewed effort is needed.”
However, not all is doom and gloom – the response of younger people offers hope.
The number of under 30s saving enough for retirement has risen sharply.
Two in five UK workers (39 per cent) aged 22-29 are now saving adequately for retirement, up from 30 per cent last year. Despite this, more than one in five young people (21 per cent) are still saving nothing for later life, with a further 20 per cent saving seriously less than the 12 per cent of income recommended.
The auto enrolment minimum is currently five per cent of qualifying earnings of which at least two per cent must be paid by the employer. In April 2019 this rises to of eight per cent of qualifying earnings of which at least three per cent must be paid by the employer.
Robert Cochran, retirement expert at Scottish Widows, said: “The fact that savings levels have stagnated for the last few years shows that auto-enrolment is not a silver bullet. It will be interesting to see if the step up in minimum contributions helps reverse this trend.”
But there is a worrying snag to all this.
The Report details how hardworking ‘multi-jobbers’ are badly affected because the earnings trigger for automatic enrolment is set at £10,000.
Using the latest Office for National Statistics figures, it projects that 1,831,127 multi-jobbers have at least one job that earns under £10,000 and is not enrolled in the company’s pension scheme. Based on the average salary from these jobs, collectively over £90 million of employer contributions a year could be claimed if the threshold was scrapped, it asserts.
Mr Cochran noted: “It’s encouraging that more young people are saving enough for a decent retirement and auto-enrolment has played a really important part.
“However, auto-enrolment was designed as a safety net for a country facing a pensions crisis. This year’s study shows some of the hardest working and most financially vulnerable members of society are slipping through the auto-enrolment net because of minimum earnings thresholds.
“This evidence underscores our continued campaign to make pensions more inclusive for low earners. It’s a thorny issue but only by tackling it will the lowest paid segments of the workforce have a fair chance of kick-starting their later life savings with support from their employers.”
Scottish Widows urges that auto enrolment levels should in due course be pushed up past eight per cent.
And it believes a one-size-fits-all approach to retirement doesn’t work. “We need to recognise that age and what someone earns are not the only factors in determining preparation for retirement. Government and industry needs to move from messages targeted at the population at large to communicating directly with different cohorts in society.”