People aren’t saving enough money into their pension pot for a comfortable retirement. That’s according to the results of our State of Retirement report, which found that Brits between 45 and 54 years old currently have an average pension pot worth £71,342.
The annual income figure commonly considered ‘sufficient’ in retirement is between £23,000 and £27,000. Bear in mind that a full new state pension in 2019/20, based on 35 years’ contributions, will be £168.60 a week (£8,767.20 a year), which leaves a shortfall of over £14,000 a year. After just five years, the average pension pot mentioned above would have been used up.
If you can increase your pension contributions, doing so, then, seems like a no-brainer. And thankfully, recent and upcoming pension changes will help.
Following automatic enrolment, instead of 47% of UK employees being in a company pension scheme, as was the case in 2012, some 73% now automatically save each month.
Minimum workplace pension contributions have also increased, and are set to increase again in 2019.
Before April 2018, only 2% of a worker's qualifying earnings went into their pension, including an employer's contribution of at least 1%. In April 2018, this rose to 5%, with at least 2% coming from the employer. The amount rises again, in April 2019, to 8%, with employers paying at least 3% of that minimum total.
To put this into context, if you earn £2,500 gross per month, from April 2019 your employer will put £75 (which is 3% of £2,500) a month into your pension and you’ll be personally contribution £125. In total, £200 a month will be going into your pension fund.