Fairinvestment Unveils Pension Saving Problems

As the credit crisis rumbles on, not only may consumers find they are struggling with their money management now but could also face greater problems doing so in the future, it has been suggested.

In research carried out by Fairinvestment, it was revealed that Britons are currently putting less than the recommended amount of money into a pension plan. At present, the typical adult is shown to be contributing some 64 pounds - the equivalent of about four per cent of the average monthly wage - into such a savings scheme.

And while for some this may seem to be a significant sum of cash being placed into a pension scheme, the company points out that the “rule of thumb” for calculating pension contributions is to half the age a person is when they first start contributing. As a result of saving four per cent of a monthly salary, it claims that a contributor would have to be eight when they started their pension savings in order to have a comfortable retirement, something that Fairinvestment reveals is quite unlikely to have happened.

It was also revealed that by currently contributing an average of 100 pounds from their monthly salary, men are making more savings into a pension scheme than women. Females were indicated to be putting in a typical amount of 50 pounds each month.

Following on from having a shortfall in pension savings, consumers could find that their ability to manage money in later life comes under strain. As such, getting to grips with spending commitments - which may include completing repayments on personal loans and mortgages, paying for property repairs or gas and electricity bills - may become an evermore arduous task.

Sharon Bratley, chartered financial planner for Fairinvestment, said: “The results suggest that future pensioners are going to struggle to survive on their pension annuities, as between four and six per cent of earnings is not a sufficient pension contribution. Of course, it does depend how old someone is when they first start contributing as to what percentage of their salary they should be paying in. The problem we are facing though is that life expectancy is on the rise and without adequate pension contributions Brits are going to find themselves struggling to survive financially during retirement.”

She went on to report that it is especially important for women to begin taking their pension seriously, not only as they typically live for longer than men, but also because they may spend less time working, due to career breaks to have children for example. The chartered financial planner added: “As women become increasingly independent, there has never been a better time for women to take control of their pensions and contribute appropriately.”

Consumers worried about their ability to save money into a pension fund might want to consider applying for a debt consolidation loan. By taking out this kind of loan, borrowers could find that they are able to merge numerous constraints on their finances into a single low-cost monthly repayment. This may leave them with more disposable income, which could then be saved into a pension pot. Indeed, this might be advisable after Alliance Trust Savings recently showed that 43 per cent of Britons are confident they will have enough money in their pensions to allow them to have a comfortable retirement.

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