4 techtalk

So it was not unexpected, though very welcome, that the eleventh Scottish Widows Retirement Report revealed that a record number of people are now saving adequately, and that current savings levels have reached our benchmark 12% for the first time. But does that mean we’re now saving enough as a nation?

WHAT IS ADEQUATE PREPARATION FOR RETIREMENT?We’ve used the same definition of adequacy for the last eleven years. It is that someone is either expecting to get

their main retirement income from a defined benefits scheme or is saving at least 12% of their income for retirement. It’s therefore a snapshot of current efforts rather than an assessment of total savings. The 12% includes employer contributions and non-pension savings for retirement, but not any money invested in property.

The 12% assumes that the income we need in retirement to feel we are adequately provided for is related to our earnings while working, but lower earners need a higher replacement percentage than high earners. Figure 1 illustrates the potential replacement rates at various income levels from a 12% a year contribution plus state pensions.

There’s been a definite upturn in the mood on pension savings in recent months. Around 5.3 million workers have now been automatically enrolled, though the pace has slowed considerably with only 133,000 added in the first half of 2015. As a direct result of automatic enrolment, active membership of pension schemes has been rising since 2012, following a decade of decline.

A RECORD HIGH FOR SAVINGS – THE SCOTTISH WIDOWS RETIREMENT REPORT 2015Ian Naismith