Pensioners at risk of living on under £10 a day in retirement

Frozen pensions are 'somewhat misleading' says Edwards

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Research carried out by True Potential has revealed that savers could be left with only £9.60 daily once they reach pension age. This is primarily due to the fact Britons are not putting enough money into savings for their retirement. As a result, pensioners are increasing their chances of falling into serious “financial hardship”.

True Potential is encouraging people to put more money into their pension pots so they can live a comfortable retirement in later life.

The firm’s calculations estimate Britons have contributed on average just £204 to their pensions in the past three months.

For context, these savings are down by £83 compared to a poll from True Potential conducted in 2017 which asked people what they save.

Based on this, the firm calculates that a three-month average pension contribution of £287 in 2017 would see someone end up with a monthly pension income of £410 per month.

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This would be around £13 per day in retirement income for someone retiring at 67 if they started saving into their pension at the age of 35.

However, the figures for 2022 show that the average retirement income would fall to roughly £292 per month or just £9.60 per day.

This represents a drop of nearly 29 percent compared to 2017 and is adjusted for two percent inflation, five percent investment growth, and employer contributions.

While the Government’s auto-enrolment policy has led to many people having a workplace pension scheme, True Potential is calling for more to be done.

Specifically, the firm is highlighting how the ongoing cost of living crisis is preventing people from saving money towards their pension.

As it stands, inflation is at 10.7 percent in the UK and energy bills have risen by 27 percent since October for households of typical usage.

Some 20 percent of Britons have admitted they are currently or will reduce the amount that they contribute to savings in order to afford the things they want to buy for Christmas in 2022, according to a True Potential poll.

As it stands, the current default rate for auto-enrolment contributions for pension schemes sits at eight percent of someone’s monthly salary.

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However, the majority of experts believe that the target for a healthy retirement income should be at least 12 percent.

According to True Potential, the Government should raise the auto enrolment rate to help fill this pension black hole once the inflation rate comes down.

Since 2012, employers have been gradually required to automatically enrol their eligible workers into a workplace pension scheme.

A consequence of this is that employees have been able to acquire more savings that they can use to provide them with an income from age 55.

Daniel Harrison, the CEO of True Potential, shared why people are struggling to put away enough money into their pensions in the current economic climate.

He explained: “The rising cost of living looks to have reduced the ability to save money for retirement for people all around the country.

“Auto enrolment has been a success but the contribution levels are just too low. Once inflation is under control the government needs to look at how to fill this shortfall.

“Raising auto-enrolment rates could be the answer to help avoid the very real risk of workers suffering financial hardship in their later life.”

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