Disillusioned women over 50 not saving enough for retirement, research indicates

News - Savings

Written by Ray Clancy

Thursday, 29 July 2010 11:42

Women over 50 need to re-engage with pensions savings as just 38% of them are saving adequately for their retirement, new research shows.

A report from Scottish Widows suggests that the introduction of automatic enrolment could kick start pension savings for younger women and adds that removing tax incentives for high earners is likely to reduce employer commitment to pensions.

Its sixth annual Pensions Report shows that there has been a dramatic drop in pensions savings since last year and it is in fact at its lowest level since 2006. The Scottish Widows Pensions Index, which tracks the percentage saving adequately for retirement, has decreased from 54% in 2009 to 48% in 2010 and a fifth, 21%, of people who could and should are saving nothing at all.

The Scottish Widows Average Savings Ratio, which tracks the percentage of income being saved for retirement by UK workers not expecting to get their main retirement income from a defined benefit scheme is currently 9.2%, a drop of 1% from last year. This falls almost 3% short of the 12% that Scottish Widows believe people should be saving to achieve a comfortable retirement.

Steve Webb, Minister for Pensions, said that as life expectancy rises people need to think in terms of planning for 20 years of retirement, not the years of retirement their grandparents might have experienced and it’s particularly important that younger people understand this.

‘As a Government we need to think big on pensions policy, we need to raise our eyes to the horizon or we will never get the starting point right for pensions savings. The starting point is getting the state pension right and then people can make clear choices about their own provisions for the future,’ he said at the launch of the report in London.

Ian Naismith, head of Pensions Market Development at Scottish Widows, said there is a section of the population, largely made up of women over 50, who have become disengaged from pensions and savings. ‘They are disillusioned and are resigned to working right through their 60s and facing a large reduction in income when they retire. We must do everything we can to encourage them to re-engage with saving, and they must have confidence that any modest savings they can make won't simply result in a reduction to means-tested benefits,’ he explained.

‘There is another group, largely made up of younger women, who have no interest in providing for their future. For them, the introduction of automatic enrolment could kick-start their savings, and we believe it is essential that the current review does not result in a delay in introducing pensions reform,’ he said.

‘Finally, we believe that removing tax incentives for high earners is likely to reduce employer commitment to pensions. We welcome the current review of the changes to pensions taxation proposed for April 2011. We recognise that any alternative will have to provide the same savings in tax relief, but it is very important that there is no further erosion of pension tax incentives, he added.