Recession starting to affect pension saving as less is put away for the future, research shows

News - Savings

Written by Ray Clancy

Tuesday, 29 June 2010 12:00

Pensions savings in the UK are being hit by recession woes with 41% saving less because of the economic downturn, according to a report published today (Tuesday June 29).

The sixth annual pensions report from Scottish Widows Pensions also shows that women are still far behind men with a fifth of those that could and should be saving not doing so at all.

The Scottish Widows index is 48% this year, down 6% since last year and the lowest since 2006. Its Average Savings Ratio is down slightly to 9.2% from 9.3% last year.

The gender gap has fallen to 9% compared to 12% last year but women still fall far behind men. Women over 50 have been hit the hardest, the index has fallen dramatically from 52% saving adequately in 2009 to 38% in 2010.

While saving for retirement has slowly been on the rise in recent years, the latest report reveals that pensions savings have seen a dramatic drop since last year .

‘The last two years have been tough on the economy and we are finally seeing the effects trickling through to pensions savings. The previous three years saw a steady rise in the number of people saving adequately for retirement, but now we are seeing the full impact of the downturn on people’s retirement pots,’ said Ian Naismith, head of pensions market development at Scottish Widows.

‘While there are signs that the economy is recovering, the nation’s saving habits paint a very different story. There is still a great deal that needs to be done from both the Government and the industry to better encourage pensions savings for the long term, particularly in the current economic environment. With 21% of those that should be saving putting aside nothing at all there is still a big challenge ahead,’ he added.

The report reveals that although both women and men are saving less than last year, women are still lagging far behind men, although men haven’t escaped the downturn as they have seen a greater drop in pensions savings than women.

Just 43% of women are saving adequately compared to 47% last year, whilst 52% of men are saving adequately this year compared to 59% in 2009. But the group hit the hardest is the over 50s, those that should be saving most for retirement, with only half of this group saving adequately. In particular, women over 50 are faring the worst, in 2009 52% were saving adequately compared to just 38% in 2010. The percentage of women over 50 not saving at all for their retirement has increased from 22% last year to 26% this year, suggesting that they are starting to give up on pensions savings altogether. This is in sharp contrast to men of this age, 60% of men over 50 are saving adequately for retirement.

The economic downturn has also affected people’s attitudes to savings, as well as their ability to save. Two fifths of people, 41%, have saved less for retirement because of the economic downturn. Nearly a third, 32%, of people with a pension and not retired believe the economic downturn has affected the size of their pension pot to a great extent, and 18% say the recession has put retirement lower on their list of priorities.

Almost half of people, 45%, feel worse off than a year ago and 20% saved less than they had done previously in the last 12 months, revealing savers have had to tighten their purse strings because of the recession.

For many it is unlikely to get any better in the near future. Although 25% of people with a pension and not retired want to save more for retirement, 29% can’t save anymore than they currently are. Over half, 54%, who haven’t saved into a private pension scheme have not done so simply because they can’t afford it and 38% don’t think they will ever save into a private pension.