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Employees underestimating the importance of a pension

Nearly two thirds (81%) of Brits across all age groups may be underestimating how much of a pension they will need for retirement, according to new research.

A MoneySuperMarket survey found that one in five (19%) workers said that they could manage with a pension pot of just £50,000, which is 81% less than the recommended £262,500.

Twenty-one per cent of workers surveyed said they do not have a pension.

This is broken down to 17% of those aged 45-54 and 29% of 25-44-year-olds without a pension.

The over 55s were the least prepared for life after work, with one in ten not having a pension.

Peter Selby, managing director of retirement services at financial planning business Punter Southall, said that the findings echoed the firm’s Financial Wellbeing Survey 2020.

Speaking to HR magazine, Selby said: “Our survey found that six out of ten employers don’t offer their people any kind of advice and guidance once they approach 55 and are able to access any pension they have built up.

“Companies recruit, train and nurture their employees throughout their career but seem to have a blind spot for the Forgotten 55s.”

More complicated regulation and hidden costs are the biggest obstacles when it comes to informing employees on pensions, according to Selby.

He added: “Employers need to help their colleagues shape a plan for life after work: which means the company can help employees plan with confidence for the future. Culturally and commercially, it’s essential.”

Though Selby admitted being over 50 without a pension isn’t ideal there are steps people can take to build up their savings.

Neal Cross, life insurance expert at MoneySuperMarket, said: “The importance of life insurance, pensions and wills are often overlooked, which could explain the disparity between the recommended pension pot of £262,0002 and how much people believe they’d need to get by.”

“Life insurance premiums increase by age,” said Cross. “Therefore, the longer you wait to get it, the higher your monthly payments are likely to be.

MoneySuperMarket’s research was derived from enquiries made into the site’s Prepared for Life tool and 300,000 life insurance enquiries.

Further reading:

Can we escape the single parent pension trap?

Employers unsure how to provide financial education to employees

HR could be guilty of age discrimination by incorrectly using post-work benefits

Pandemic forces early retirement in over 50s