Millions of mid-life UK employees are sleep walking into retirement, according to new research from Aviva UK.
The study, which looked into mid-life employees’ financial preparedness for later life, revealed 64% of employees aged 45 and over – the equivalent to nearly nine million people – do not know how much they will need to save to afford a comfortable retirement. In addition, over five million mid-life employees (37%) do not know how much is already saved in their pension. Question marks also hang over the state pension with two in five (43%) respondents unaware of how much support they will receive from government. A further 26% do not know at what age they’ll be eligible for the state pension.
With the full new state pension currently valued at £168.80 per week, this adds up to a retirement income of £8,777.60 per year. Most employees (62%) aged 45+ do not know what the pension freedoms mean for them, while 37% do not know what type of pension scheme they have – for example whether it’s a defined contribution or defined benefit scheme.
However, the analysis also highlights it is never too late to save. Based on the average UK salary of £28,000, Aviva calculates that an employee aged 45 today with no savings to date could build a pension pot of £56,100 by the time they reach 65, based on the current minimum employee and employer pension contributions under auto-enrolment alone (a combined 8% of annual pensionable earnings).