15.3 Million Brits Face Future Poverty Risk
Concerning new research has brought to light a significant number of individuals on a trajectory towards a retirement characterized by financial hardship.
The State of UK Retirement Savings
Several prominent investment institutions regularly publish reports assessing the health of the retirement market. The latest insights from Scottish Widows, presented in their National Retirement Forecast (NRF), conducted in collaboration with a leading economic forecaster – paint a sobering picture of the situation.
Key Findings from the National Retirement Forecast
The NRF’s findings reveal a widespread struggle to achieve adequate retirement security:
- A staggering 39% of people aged between 22 and 65 are currently not on track to achieve even a minimum lifestyle in retirement. For a single person, this translates to a net income below £14,800, and for a couple, less than £23,100. To put this in perspective, the target income for a moderately comfortable retirement is £32,200 for a single person and £44,400 for a couple.
- 27% of individuals are worried they will be compelled to work beyond their desired retirement age just to ensure they have sufficient savings.
Alarmingly, 15% do not anticipate ever being able to retire at all.
The Impact of Minimum Automatic Enrolment Contributions
For those contributing at the minimum automatic enrolment level, the outlook is particularly bleak:
- 48% are heading for only a minimum retirement lifestyle.
- 35% are at risk of being unable to cover their fundamental needs in retirement.
Understanding the Most Vulnerable Groups
The research specifically identifies three demographic groups with the most precarious retirement prospects:
Generation Z: Competing Priorities
Individuals born between 1996 and 2010 face a unique set of financial challenges that make retirement savings difficult. The study found that 25% of people in their 20s prioritize saving for emergency expenses, while 13% are simply unable to save anything. NRF projections indicate that over four in ten individuals in their 20s are at risk of poverty in retirement, with nearly a quarter only able to afford a minimum retirement lifestyle.
Squeezed Low to Middle Earners: The Auto-Enrolment Gap
This segment of the population has been disproportionately affected by the limitations of the minimum automatic contribution level. Individuals in their 30s earning between £20,000 and £35,000 are the most likely to be contributing at this minimum threshold, leaving them vulnerable.
The Self-Employed: A Significant Oversight
The UK’s 4.4 million self-employed workers have historically been excluded from automatic enrolment, and the data clearly reflects this omission. A concerning 51% are at risk of not being able to cover their basic needs in retirement, with another 25% on track for only a minimum retirement lifestyle. Furthermore, 23% are not saving anything at all for retirement, effectively relying solely on the State Pension.
Taking Action for Your Future
While the outlook for these vulnerable groups may seem daunting, it’s important to remember that all is not lost. Increased contributions later in life can help bridge the savings gap. However, the longer you postpone action, the more substantial those contributions will need to be.
For personalised guidance on navigating your retirement planning and ensuring a secure future, contact Chartwell Wealth Management today. One of our expert advisors will be in touch.
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