Aviva has called on the government to provide more support for younger pension savers after its research revealed that many were in the dark about how much they needed to save.
It said a blueprint of support must be developed before it was too late.
Aviva research predicted that 3.4m younger pension savers set to retire in the 2050s – aged 32-40 today – would achieve only a modest pension pot of £225,000 by then.
Aviva pointed out that paying just an extra 2% into a pension each year could increase total pension pots by £56,000.
The company worked with UK economics consultancy WPI Economics to publish a report ‘Planning for retirement in the 2050s’.
It analyses the challenges facing those set to retire in the 2050s and explores the support and policies they may need to manage their wealth in later life.
It revealed that a typical middle-income earner, contributing 8% of earnings into a defined contribution pension throughout their working life, could retire with a pension pot of £225,000 in the 2050s.
Although significant, that level of wealth is unlikely to provide someone with even a ‘moderate income’ in retirement, according to the Retirement Living Standards (PLSA).
The research found that fewer than one in five (19%) felt completely or somewhat prepared in terms of how they will fund their retirement.
Most (64%) said they do not know how much they need to save into a pension to realise their desired retirement income level, and more than half (52%) would not know where to start when it comes to planning for their retirement.
Doug Brown, chief executive of UK & Ireland Life at Aviva, said: “The pension landscape has changed significantly over the past decade, but the introduction of important initiatives like automatic enrolment in 2012 and Pension Freedoms in 2015 have not yet been matched by the wider support needed to help people make the most of the opportunities available to them. This needs to change and change quickly if we are to help future retirees.”
He said the vast majority of the 3.4 million people retiring in the 2050s will need financial advice, and “everyone will need robust, well-designed professional support in their decision-making and planning, but the majority say they have no idea where to begin.”
He warned there was no clear vision of the support people needed, and consequently policy is piecemeal and insufficient – leaving savers at risk from poor decisions.
He said: “Government, regulators, and industry need to work together to develop a blueprint of the support that pension savers need and take steps to put that support in place, so future retirees are able to make better decisions and achieve more positive retirement outcomes.”
• The report included results from an online survey of 3,000 adults aged 18 to 75 across the UK, which was conducted by Ipsos on behalf of Aviva. 2,000 adults aged 18 to 75 across the US were also surveyed to provide a comparison. Fieldwork was conducted in March 2023. Quotas were applied to ensure the sample was representative of each country on age, gender and region. Those set to retire in the 2050s are defined as aged between 32 and 40 years old, and ‘middle income’ is defined as those on a personal income of between £25,000 to £44,999 a year.
