‘Many in dark about value of pension’

Millions of pension savers are in the dark as to whether they are saving enough for a comfortable retirement, a report warns. Four in five people risk not being able to afford the lifestyle to which they aspire.

MILLIONS OF pension savers are in the dark as to whether they are saving enough for a comfortable retirement, a report warns today.

Four in five people – a figure that equates to 30.4m workers – risk not being able to afford the lifestyle to which they aspire in their later years, the Pensions and Lifetime Savings Association says.

The organisation is calling for the introduction of retirement income targets showing the lifestyle someone could afford on different levels of income. It says seven in 10 people think such targets would encourage them to save more.

Although a third of people say they could afford to save more for retirement, they are held back by uncertainty about how much cash they will need, the report suggests.

Automatic enrolment into workplace pensions was introduced in 2012 to head off fears of a later life savings crisis. Minimum contribution rates into workplace pensions are gradually being stepped up to encourage people to save more.

But many people wrongly assume that this minimum level is the target they should be aiming for to be comfortably off, the report has found.

Nigel Peaple, director of policy and research at the Association, said: “Millions of savers are in the dark about whether they’re on track for the lifestyle they want in retirement.

“With future generations unlikely to have the same levels of property wealth, or final salary pensions, as current retirees do, it’s vital more is done to ensure people can cover the costs of later life.”

Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said how much to save was one of the most commonly asked questions about pensions.

He said: “A system of retirement income targets would help people to work out what sort of retirement they could expect.

“This would also enable pensions to be presented in a positive light as giving people choices over their quality of life in retirement, rather than trying to make them feel guilty about not saving enough – a strategy which has never worked in the past.”

Baroness Ros Altmann, another former pensions minister, said: “It is certainly true that people are not sure how much they should be contributing to a pension, to secure themselves a comfortable retirement.

“If you do not have enough saved, you could decide to keep working longer and save more.”