Nearly 90 per cent of Brits are not putting a proper amount of money into their pension pots — usually thought about to be about 15 per cent of earnings, as per the Institute for Fiscal Studies report
UK workers face a “risky” future in terms of pensions, as per a report by the Institute for Fiscal Studies.
The report published last week outlines “challenges” facing future generations and asserts that the whole system requires to be evaluated.
Nearly 90 per cent of Brits are not putting a proper amount of money into their pension pots — usually thought about to be about 15 per cent of earnings, as per the Institute for Fiscal Studies report. People on lesser incomes are especially at risk as they do not necessarily meet the requisites for automatic pension enrolment.
Just 44 per cent of those earning £5k–£10k (between $6,200 and $12,500) annually took part in a pension in 2019, according to the report, in contrast to 87 per cent of people with median earnings (£25k-£30k) and 92 per cent of those who earn above £50k.
Majority of pension money is put aside through defined contribution (DC) programs, where the closing amount depends on the amount of money the owner contributed during their life and the outcome of their investments. The alternative is the less popular defined benefit (DB) system, in which a pensioner gets a retirement pay based on their closing salary and the number of years they worked for their employer.
A growing number of people are retiring with DC pensions, which provide greater flexibility but also gives owners the responsibility of managing the finances, and the related risks, themselves, according to the report.
While pension freedoms do give people the chance to take control of their own finances, even for the most numerate the decisions on how to draw on their pension wealth through their retirement are hard, the Institute for Fiscal Studies states.
A growing number of people are also choosing to work for themselves, but there has been “a collapse” in pension saving among self-employed people, according to the Institute for Fiscal Studies report.
We require a vital evaluation of pension provision now in order to give us an opportunity of avoiding a future that appears worse than the present, the Institute for Fiscal Studies report states.