Lack of adequate income is increasingly to blame for why people do not choose to save towards retirement, according to research by Equiniti.
In its analysis of the Wealth and Assets Survey, a longitudinal study conducted by Office for National Statistics (ONS), Equiniti found that 55% of people surveyed between July 2016 to December 2017 blamed low income, lack of work or still being in education, for why they were not contributing into a pension.
This is a rise of 17 percentage points from the 38% of people who cited this as a reason between 2010 and 2012.
The latest figures represent preliminary estimates from the longitudinal survey’s 2016-17 cohort (wave six) which examined around 20,000 UK households. The 2010-12 cohort (wave three) examined 21,000 households.
Further answers revealed how crucial disposable income is to pension saving, with a third saying they could not afford to contribute in general, and 18% said they had too many other expenses.
Also, some 63% of eligible employees were aware that they had been automatically enrolled into a workplace pension, and of all eligible employees who reported that they had not been automatically enrolled into a workplace pension, 91% were already enrolled.
Despite this, some 13% said they did not know enough about pensions to contribute financially, and 39% said that they did not understand enough to make decisions about saving for retirement.
Equiniti propositions and solutions director Chris Connelly commented that the responses hit home the need for better communication around the benefits and importance of pension saving.
“This survey clearly emphasises that pension saving is one of the first outgoings to be cut when money is tight – it is not prioritised,” he said. “However, with the state pension unlikely to sustain a good standard of living in retirement, it is absolutely crucial that people do put away money for later life whenever they possibly can – particularly given the additional payments that employers will make in workplace schemes.”
Connelly added that the Pensions and Lifetime Savings Association’s proposed national retirement income targets could be one way to encourage people to value the worth of their pension.
“At present, people don’t understand a pension: don’t value the benefit and it is not seen as a priority which is naturally going to lead to the conclusion that the monthly contributions could be better utilised,” he said.
“Making the process of saving (in whatever vehicle) more accessible and putting a tangible objective in place that will result in tangible rewards should encourage better behaviours and continue to build on the good work of auto-enrolment.”