Pensions savings buck the downturn but confidence falls

As the nation has been hit hard by the recession in recent months, the fifth annual Scottish Widows UK Pensions Report reveals that pensions savings have actually increased since last year and those saving adequately have increased by 8% since the lows of 2006. While pensions savings have gradually been on the up in recent years there has always been a clear gender divide. In 2008 women closed the gap on men but this has increased again this year. 59% of men are saving adequately compared to just 47% of women. The over 50s are also suffering, with this group the most likely to have cut their savings in the last 12 months (21%). Women over 50 have been hit the hardest, the index has fallen from 57% in 2008 to 52% this year.

The Scottish Widows Pensions Index, which tracks the percentage saving adequately for retirement, has risen from 51% in 2008 to 54% in 2009. And the Scottish Widows Average Savings Ratio, which tracks the percentage of income being saved for retirement by UK workers not expecting to get their main retirement income from a defined-benefit scheme, rose from 8.7% to 9.3%, the highest level recorded since the yearly survey started in 2005, although this still falls short of the 12% that Scottish Widows believe people should be saving to achieve a comfortable retirement.

Ian Naismith, Head of Pensions Market Development, Scottish Widows comments: "We have seen our Index and Ratio figures rise considerably once again this year so the message that people need to improve their pensions savings is certainly getting through. The rise in those saving adequately cannot be solely attributed to pensions savings. Non-pensions savings has continued to rise, but total investments held have continued to fall suggesting that people are putting aside more but also withdrawing from their savings in the short term.

"In addition to this, contributions to employer-sponsored Defined Contribution (DC) schemes have increased, especially amongst higher earners. With many employers closing Defined Benefit (DB) schemes, they may be contributing more than the average to DC schemes. But there is still more that needs to be done from both the Government and the industry to better encourage pensions savings for the long term, particularly in the current economic environment. With 19% of those that should be saving putting aside nothing at all there is still a big challenge ahead."

Pension under-dogs impacted

Despite the level of pension savings steadily increasing year on year, there are still many people that either do not have access to a pension scheme or are just not saving enough. The gender gap between men and women has increased once again this year - rising to 12% with a quarter (26%) of women not saving compared to just 15% of men. Women over 50 have been hit the hardest - the index has fallen from 57% in 2008 to 52% this year and the percentage not saving at all for their retirement has increased from 14% to 22% suggesting that they have given up on pensions savings altogether.

When it comes to working status, the self-employed have been the hardest hit in the great pensions divide, only 32% are saving adequately and a third (33%) are not saving at all. For those people who have access to a DB scheme, traditionally the "gold standard" of pension savings, they still have a big advantage. Nearly half (45%) of those saving regularly expect to receive an income from a DB scheme in retirement. But these schemes are in decline. While over half of those aged 50 or over with a private pension claimed to be in a DB scheme this falls to just 16% of those aged under 30.

Economic downturn causes drop in confidence

While the number of people saving adequately for their retirement is slowly improving, the impact of the recession is starting to take its toll. Over a third (36%) of all people say they can't save anymore than they currently are and this rises to 58% of non-savers. Just 17% of people have saved more over the past 12 months than they did in the 12 months prior to that - 19% are saving less than they were previously. Almost two thirds (63%) of people think it's unlikely that they will save anymore over the next 12 months.

Over a third (35%) of people with a pension aged over 55 believe the economic downturn has impacted their retirement savings. With a quarter of all workers (28%) feeling insecure in their current employment, or not knowing whether their job is secure, this uncertainty when it comes to pensions savings is likely to remain. Amongst people who said they were unlikely to start saving more for the long term over the next 12 months, one in seven (14%) stated that the uncertain job market and economic outlook was preventing them from saving more.

Confidence in how much pension schemes will deliver in retirement has also been hit significantly. 48% of people said that that the state pension would help to ensure they enjoyed a reasonable standard of living in retirement. This compares with 40% who chose company pension schemes. These figures have fallen dramatically since 2007 when 58% thought that the state pension would provide a reasonable standard of living and 51% thought likewise of their company pension scheme.

Ian Naismith, Head of Pensions Market Development, Scottish Widows comments: "We have consistently seen groups such as women and the self-employed falling behind when it comes to pensions savings. The impact of the economic downturn is likely to make these groups even more vulnerable when saving for retirement and there needs to be more done to better encourage everyone to save for the future. In particular it seems that many women over 50 have almost given up on saving for retirement. While people may be worried about their current financial situation they need to make sure they continue saving for the future so they can enjoy their retirement. We believe those that are able to save should be saving 12% of their main income, and many people are still falling far short of this figure."