Additionally, over half (54%) of adults only save between £1-150 in their pension. However, with estimates stating an individual’s pension contributions should be 12% of their monthly salary for a modest retirement and an average salary of £31,285 for full-time employees in the UK, monthly contributions should be closer to £313 per month, meaning that the majority of the country’s workforce are falling short of key saving milestones and face having to work longer in order to afford their later life.
These stats are particularly concerning as they show people are missing out on the effects of compound interest by not saving enough earlier in life. Saving more or saving earlier will increase the amount of money they have at retirement, not only through the size of their pot, but through the effects of the extra interest and returns they will accumulate over the years.
Dr Linda Papadopoulos comments:
“Penfold’s research shows that the way people approach and think about long-term savings habits are having a huge effect on their pension pots and, ultimately, the lifestyle they will have in retirement. Studies into delayed gratification show that people will generally choose to do something if they believe it will benefit them immediately, which is why it’s unsurprising that people are more likely to commit to habits such as exercising or limiting their social media time over saving for retirement.
“However, there are things that people can do to change their habits. Thinking about what they want to be able to afford in retirement, whether that’s holidays or regular meals out, will help them realise why saving now is in their best interests and will define how much they need to contribute to their pension pot. These aims can then be broken down into more attainable savings goals in the short-term.
“People also get greater validation when they are able to track their savings progress, so finding a pension provider that allows savers to manage and track their pension effortlessly and see the growth in their pension pot will encourage them to put aside more in the future.”
Chris Eastwood, Co-founder at Penfold, says:
“Our research shows that habits which people think are easy to commit to are, in fact, easily broken and forgotten. This is particularly worrying for people’s retirement savings considering many people find these aims easier to achieve than pension saving.
“A lack of engagement with pensions has long been an issue and our research shows this continues to be a problem, with the UK sleepwalking into a future crisis where people can’t afford their retirement. As new year’s resolutions fall by the wayside, now is the time for people to think longer-term and break down their retirement goals into small, achievable actions.
“It’s clear that the industry needs to provide more support in doing this. Pensions that are easy to understand and easy to access will be crucial in helping them to shift their mindset when it comes to saving for the future. That’s why at Penfold we’re dedicated to providing a simple, transparent and modern pension service that can be managed and tracked effortlessly within a few clicks of a button, while giving people the support they need to set their savings aims through tools, such as goal-setting features and our pension calculator.
“It’s also key for people to be able to see the growth of their pot in real-time so that they remain incentivised to keep prioritising their pension against any shorter- or medium-term savings goals they may have. Ultimately, making pensions relevant to the 21st Century will be the key to changing the nation’s mind about saving for the future.”
