A report from the Office of National Statistics has shown that the number of people planning for the future with career pension schemes has fallen to an all-time low. In both public and private sector careers, saving into workplace schemes has fallen below 50% for the first time since records began.
In 2015, 12.2 million, 48%, workers were in occupational pension schemes, compared to 55% in 1997. As the economy continues to be unstable, house prices fluctuate and elderly care costs rise, can people afford to be so unprepared in their careers for the future?
Tom McPhail, head of career pensions research at consultancy Hargreaves Lansdown, said: “Undoubtedly the recession drove many workers to pull out of schemes due to financial pressures. But various changes in legislation over the years have also led to employers shutting down final career salary schemes. Pensions are seen as a discretionary spend but millions are sleepwalking into retirement only to find they haven’t saved enough during their careers.”
Statistics also revealed that just 9% of private sector employees were in final salary or career average schemes, compared to 34% 14 years ago.
The schemes guarantee workers a yearly sum based on length of career. However, they are expensive to fund, and have long been in decline in the UK.
The Daily Telegraph states that the UK is already facing a pensions demographic “time bomb” as workers live longer but careers are the same length, and so the retirement deficit swells, with the latest ONS figures likely to heap further pressure on the Government to implement radical measures to tackle the issue.
From October 2012, new regulations introduced by the Government forced all employers to offer workers a pension scheme, under “auto-enrolment”, in an attempt to get an extra 10 million people saving for retirement during their careers.
But experts say the contribution levels required from businesses and workers – a combined 8% of an employee’s salary – are too low to tackle the issue properly, raising the prospect that businesses may have to contribute more into schemes.
People themselves can tackle this issue by examining their private and company pension plans and considering their own career ideals. It may be time to consider a career change and to start seriously considering your financial future.