People are more aware of their pensions than ever before, but how has media attention and the rollout of auto-enrolment impacted Britain’s pension performance? Each quarter, personal pensions provider True Potential conducts their Tackling The Savings Gap: Consumer Savings and Debt Data report. Using this data from Q1 2016 to Q3 2017, we analyse how pension attitudes have altered.
Those adding nothing towards their pension
It is assumed that as pension awareness increases, the number of people failing to contribute to a pension would fall. Is this what the stats are saying?
Back in Q1 2016, more than a third (34%) of Brits failed to add anything to their pension. By Q3 2017, this figure had increased significantly to 45%, rather than decreasing as expected. In fact, in 2016 and 2017 so far, Q2 2016 has been the best month for pension contributions; the number of people failing to contribute was at its lowest (29%).
Of the two genders, women are most likely to fail to contribute to their pension. In each of the quarters — with the exception of Q1 2017 when the data was unavailable — a greater number of women failed to contribute. This was at its highest in Q3 2017, when almost half of all women (49%) did not add to their pension.
How much are we contributing on average?
So what exactly are we contributing? Of the data available, we contributed the most in Q4 2016, adding £566 on average to our pension pot. This was followed by Q2 2016, with an average contribution of £474.
Q3 2017 saw the lowest average pension contribution of all the quarters reviewed, averaging at £203. However, the Q3 2017 Tackling The Savings Gap report does discuss Britain’s growing debt. On average, UK consumers take on £370 of debt each month, with 33% of those surveyed admitting to having financial worries on a daily basis. As unsecured borrowing rises to £200 billion, according to Bank of England data, perhaps Britain’s mounting debt is hindering our pension performance?
Aside from Q3 2017, most Brits added £1-£300 to their pensions in each of the quarters analysed.
Pensions now
Pension contributions have been found to vary greatly between quarters. While highlighting the flexibility offered by personal pensions, it’s clear that our pensions are struggling amongst our other priorities. Illustrated by the changeable monthly contributions, debt and other monthly outgoings could be consuming our finances, stunting our financial planning for retirement.
Despite this, even the smallest pension contribution can make a significant difference to our future retirement funds.
True Potential Investor has also found that on average, British people spend £4.70 per day that they later regret on food, alcohol, clothes and going out. If this amount was invested into a pension in a typical balanced fund for 35 years, it could result in a pension pot of £189,607— enough to fund eight years in retirement, based on receiving £23,000 annually.
No matter how small the contribution, it’s important that we do all we can to prepare for retirement. We need to strike the difficult balance of managing our financial commitments with contributing to our pensions — and the sooner we start, the better we could support ourselves in later life.
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