- The newly launched Hargreaves Lansdown Savings and Resilience Barometer shows less than 40% (39.7%) of people are on track to achieve the moderate level of income highlighted by the PLSA retirement income targets.
- The PLSA standards say a single person would need a retirement income of £20,800 per year to achieve a moderate standard of living while a couple would need £30,600. This includes the state pension which can be worth up to £9,340 per year per person.
- 71.5% of the highest income quintile are on track to hit this target but this is not surprising given their higher income means higher contributions. It then drops steeply for the next highest income group to 47.2%.
- While 45.2% of Generation X are on track to hit this target only 17.7% of Generation Z can say the same. Well over a third (36.1%) of millennials are on track.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:
“Most people would like to think they will be able to afford a few luxuries here and there during their retirement years, but this data shows we are way off track with less than 40% of people on course to enjoy a moderate lifestyle in retirement. Without action many people face living only the most basic standard of living in their later years.
Almost three out of ten of the very highest earners are not on track to hit this target – a surprise given the high level of income they receive. The fact it then drops steeply for the next highest income group to 47% shows a real lack of engagement with pension planning.
While some groups, notably Generation X are making better progress this may be because they are more likely to have benefited from final salary pensions. Others may have also started to take their retirements more seriously as they get older and so are putting more money into their pensions. Younger generations look far more exposed with Generation Z in particular lagging when it comes to saving for retirement.
These are the first figures from our Savings and Resilience barometer which measures the financial resilience of the UK. Over time we hope to see these figures improve but people need to engage now if they are to get good retirement incomes.
Retirement can seem like a long way away and it’s tempting to shelve the longer-term planning when there are pressing demands on our finances. However, we know the earlier you start contributing to your pension the better. We need people to engage more and if possible, go over and above auto-enrolment minimums when it comes to contributions as over time this can add up and make a huge impact on your resilience in retirement. Some employers are willing to pay more into your pensions if you do and so it’s worth asking if this is also available as it can really make a difference over the long term.
It may seem onerous but by engaging now you are saving yourself a lot of hassle. You won’t have to find much higher sums in the future to try and make up any shortfall and your future self will surely thank you.”
About the HL Savings and Resilience Barometer
In partnership with Oxford Economics the HL Savings and Resilience Barometer measures the financial resilience of the nation every six months, to see whether we are getting stronger or facing bigger challenges.
The Barometer is unique because instead of looking at specific aspects of our finances in isolation, it draws together 17 data points from a number of official data sets, across these five pillars to provide a holistic measure of the state of the nation’s personal finances.
It is structured around the five pillars of financial behaviour that we consider fundamental for households to balance current and future demands, while guarding against risks. These are: controlling your debts, protecting your family, saving for a rainy day, planning for later life and investing to make more of your money.
The aim of our work in this area is to help to promote awareness and understanding, inform the debate, and ultimately help improve the decisions individuals and policymakers make to improve financial resilience.