UK is world leading in ensuring savings provide retirement income
Despite concerns about employees affording to retire, it seems that UK employers are trying to ensure that their staff have a decent income when they finish work.
A global study by Aegon on people’s retirement outlook revealed that the UK is world leading in ensuring that workplace savings are a key to providing retirement income.
Despite the decline of defined benefit pensions, the introduction of auto-enrolment means that employees in the UK now expect a third (32%) of retirement income to come from their workplace savings.
The study revealed that only employees in the Netherlands place greater reliance on workplace savings to fund retirement, with workers there expecting 38% of their total pension income to come from employer schemes, while in general globally, people expect workplace plans to fund 24% of their retirement income.
Globally, the survey found that people expect government benefits to fund nearly half (46%) of their retirement income, with the figure sitting at 42% in the UK.
Although there have recently been further moves to increase the UK state pension age, the research also showed that many young people in the UK still expect to retire at a median age of 65 – which places greater reliance on adequate private provision.
Steven Cameron, Aegon UK’s pensions director, said: “Retirement has long been characterized as a ‘three-pillar’ model with government benefits, employer pensions and personal savings all supporting individuals when they stop working and no longer have earnings from employment. There are significant global differences in the extent to which people expect their retirement income to come from each of these pillars, depending on the retirement system in the country where they live.
“The research shows how each country is reacting to the crisis of an aging population in different ways. The UK’s solution to focus on workplace savings makes it world leading, whereas its decision to increase state pension age is likely to mean expectations from the state pillar remain below the international average. But those countries which place significant reliance on often unfunded government benefits, despite widespread concerns about their sustainability as life expectancy rises, could face issues as future generations approach retirement.”