Thousands of high earners could end their days in poverty because they aren't saving enough for retirement
Workers at the top of the financial ladder have been warned by the Government that they face sliding quickly to the bottom when they retire unless they make contingency plans now.
A study by the Department for Work and Pensions (DWP) has found that more 12.2 million people in Britain are neglecting to put robust pension plans in place and could be in for a shock later in life.
The report says that many face delaying retirement by eight years unless they drastically increase the amount they’re saving.
The stark reality, the research suggests, for 400,000 workers in Britain currently earning more than £35,000 a year risk is that they could find themselves among the poorest 20 per cent of pensioners once they've been handed their carriage clocks.
After crunching the numbers, the DWP says that those earning £20,000 need to save £1,260 a year to have a comfortable retirement, those on £28,900 need to put away £3,250 and those bringing home £40,800 need to squirrel away £5,260.
The issue has been exacerbated, the study found, by a fall in the number of people participating in workplace pension schemes, with membership in 2012 at its lowest level since the early 1960s - falling from 57 per cent of all employees in 2002 to 47 per cent in 2012.
Of those in the private sector, around two thirds are not active members of pension schemes, compared to just 17 per cent of public sector employees.
The Government's automatic enrolment programme is expected to bring up to 10million workers onto workplace pensions, but even with this landmark project rolled out, many workers are not be saving enough to provide a comfortable lifestyle in retirement.
In fact, the Department for Work and Pensions report says that at current savings levels, auto-enrolment combined with the new, flat-rate state pension, will only do enough to ensure that just one million extra people are brought onto adequate retirement incomes.
The report said: 'With the Government's reforms in place, over half of people currently of working age considered in our analysis are expected to build adequate retirement incomes and maintain their living standards during retirement.
'However, this leaves an estimated 12.2 million people facing inadequate retirement incomes. Roughly half of these are within 20 per cent of their target amount, with the remainder facing a more significant challenge.'
Pensions minister Steve Webb told The Daily Telegraph: ‘People want the same sort of standard of living when they retire as when they were working, but unless you are putting a significant amount by, you could face a significant drop in your standard of living.
‘It’s tempting to think that not saving enough is just a problem for people on modest incomes, but it goes all the way up the income ladder.
‘We found some of the people who will have spent their working lives at the top of the scale could spend their retirements at the bottom if they don’t do something about it.’
Source: Daily Mail