UK has biggest individual pensions gap in Europe
The UK has the largest pensions gap per person in the whole of Europe according to research released today.
A new in-depth study by Aviva - which looks at the pensions gap across a number of European countries, including the UK - defines the UK's pensions shortfall as £318 billion (€379 billion). This means UK adults need to put away an average of £10,300 every year in order to close the gap. The research, carried out by Aviva in conjunction with Deloitte, was conducted to quantify the current gap, with a view to tackling this growing issue.
The pensions gap refers to the difference between the income needed to live comfortably in retirement, and the actual income individuals can currently expect.
The UK gap of £10,300 (€12,300) is an average based on the 31 million UK adults who are due to retire between 2011 and 2051.
However, the problem is even more acute for older people who have less time to make good their personal shortfall. It could also particularly affect those on lower incomes, for whom setting aside money may be more difficult.
For those fast-approaching retirement, the issue is urgent. For example, assuming a retirement age of 65, a 50-year-old still has 15 years in which to invest. However, someone in their 60s has much less time to make up a considerable shortfall.
Toby Strauss, Aviva's UK Life CEO says: "While it has long been said that there is a pensions gap in the UK and beyond, this new study actually puts a figure on the shortfall. The findings are startling, with a UK shortfall of £318 billion annually.
"We know from our research that many people in the UK are planning to work later into life, but this will not solve the issue fully. However, the problem is not without solution. By investing from an early age, even a small amount can make a big difference in closing the gap. The younger a person is when they start putting money away, the more time they have to build up a sufficient fund to provide the lifestyle they desire in retirement.
"Today's research should act as a wake-up call for individuals and governments across Europe, particularly in the UK. Fortunately it is not too late for people to take action. Aviva believes that effective partnerships between the Government and the private sector are crucial to solving this problem."
Making sense of the pensions gap
To help people better understand pensions and to aid retirement planning, Aviva is launching a new iPhone app. Available to be used on Apple's iPhone, iPod touch and iPad, the free download is a simplified version of the Aviva Pensions Tracker, which allows Aviva customers to plan their investments.
The features include illustrations of the income individuals might expect in retirement using many different projections, so people can understand how different investment methods could affect their retirement income.
In addition, Aviva has this week launched a series of print and radio adverts to encourage younger generations to start putting money aside for the future.
A copy of the full report detailing the UK pensions gap is available aviva.com/europepensionsgap.