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Auto-enrolment is not a panacea for UK consumers


Despite the introduction of auto-enrolment, retirement savings in the UK are in dire straits as consumers start saving too late, don’t save enough and are saving in the wrong financial vehicle, according to new research.

A large swathe of the British public risks running out of money in retirement as the average individual starts saving at the age of 30 and expects an annual retirement income of around GBP31,763. In reality, few will achieve this with current saving rates. 

The CoreData Research UK Retirement Report 2015 finds millennials, the UK’s youngest savers, are the least prepared demographic group as more than half (53 per cent) have no pension savings at all. They run the greatest risk of a funding shortfall. Not only do fewer of them save, but they, on average, expect to retire earlier and are likely to live longer than they anticipate, leaving them with more years to fund in retirement.

On average, those millennials who have yet to start saving for a pension do not expect to start saving until they are almost 40 years of age (38 years old). 

Furthermore, consumers saving for retirement are not making use of the optimal vehicle available. The majority are using low interest saving accounts, with 68 per cent of baby boomers, 58 per cent of millennials and 48 per cent of generation X doing so.
Craig Phillips (pictured), head of international, CoreData Research, says: “Although auto-enrolment brought about positive change and active membership of occupational pensions increased by over two million, the system could undermine its own aim. Individuals may think saving in an occupational scheme is enough but the truth is, average contributions have halved due the low mandated minimums currently in place. 

“Financial services providers need to step in, engage and educate young people to make saving habitual. They also need to bring home the importance of pension saving as millennials expect to retire earlier but are likely to live longer than they anticipate, leaving them with more years to fund in retirement.” 

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