The key findings are:
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Someone on average earnings targeting the ‘gold standard’ of a total pension of two thirds of their pre-retirement income, and securing inflation protection and provision for a surviving spouse, would need to work to 77 if they only contribute at the statutory minimum level;
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Someone targeting the ‘silver standard’ of half their pre-retirement income would need to work to just over 71;
In both cases this is based on someone starting to save at age 22 and continuing to contribute each and every year until they retire.
The report also considers what would happen to someone who doesn’t start contributing at the statutory minimum level until later in life. It finds:
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Those who start saving at 35 need to work to 79 for a “gold standard” pension with index-linking and provision for widows and widowers; those who delay starting saving until 45 would have to work into their eighties to make up the shortfall;
The report also considers the position of people on higher incomes, such as those on double the national average income. It shows that the goal of 67% of pre-retirement income is effectively unattainable for those who contribute only at the statutory minimum level; the more modest goal of 50% is attainable by working to around eighty.
For individuals who want a good quality retirement without working well beyond traditional retirement ages, the report shows what level of contributions would be required. For those aiming for a ‘gold standard’ pension with protection against inflation through retirement, contributions of around 20% of gross pay throughout a working life would be required, whilst the silver standard could be attained with consistent contributions of around 11% of pay.
The report also assesses how far individuals can shorten their working life by giving up otherwise valuable features of pension provision such as protection against inflation through retirement and provision for a surviving spouse. This more modest objective can generally be achieved several years sooner.
Commenting on the results, Royal London Director of Policy Steve Webb said: “Getting millions more people saving through automatic enrolment is a huge step forward, but many face a cruel disappointment if they think that current minimum contribution levels will deliver them the sort of retirement they are looking for. Without significant increases in contributions, we could be witnessing the death of retirement.
This report shows that today’s workers are unlikely to be able to secure the quality of pension provision enjoyed by many in previous generations without either working well beyond pension age or contributing substantially more. Even those who save systematically from the start of their working life could face working into their late seventies if they want to replicate the best pensions of those retiring today.”
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