Saving for old age

UK savers face retirement savings gap

The Chartered Insurance Institute (CII) has looked at the cost of living post-work and found that average incomes achieved by retirees are insufficient. UK savers face a retirement savings gap of £9 trillion due to increasing levels of debt, the cost of long-term care and insufficient pension savings.

The CII has used existing data produced by the Organisation for Economic Co-operation and Development (OECD) to calculate the shortfall in savings needed to cover the cost of living in old age. It shows that, on average, pensioners achieve only 30 per cent of their pre-retirement salary as income during retirement, significantly less than the 70 per cent the OECD believes is necessary to live adequately.

This assumption does not factor in the cost of long-term care and paying back of debt, so the CII has tried to show the difference between what people are actually saving and what they need to save to live comfortably and cover these additional costs.

In the latest annual Scottish Widows UK pension report only 51 per cent of British workers are saving adequately for old age. This seventh annual Scottish Widows pension report, based on interviews with 5,200 adults, shows there is ‘widespread and ingrained inertia’ across the country.

Commenting, Pensions Minister Steve Webb said: ‘The next generation will face a different world with increasing life expectancy, the decline in final salary schemes and lower annuity rates. They are going to have to take greater responsibility for saving for their retirement.’