Pension Minister Richard Harrington wants everyone to have savings of £250,000 when they retire.
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But hard-pressed workers are doubtful they can meet his target.
Pension firm Aviva has also crunched some of his numbers and found that the average worker would have to increase their pension contributions by around 25% every month.
The firm also worked out that a worker saving for 40 years at the recommended rate of 8% of their annual salary is likely to accrue a pension pot of only £73,620.
The minister argues that although millions of people have joined pensions in recent years, the true success of the measure rests on them saving enough for a comfortable retirement.
Everyone needs to save £250,000
Harrington has set his target as two-thirds of a final salary of £27,000 – which is £18,000.
The state pension provides £8,300 of the amount, leaving a shortfall of £10,000 to come from savings.
To generate this amount each year, a pension pot would have to grow to between £200,000 and £250,000 over a typical worker’s lifetime.
“It is very clear to me that, for people starting work today, that has to be their objective. Every day I think of that figure in the morning and it is not a bad way of trying to decide policies,” he said.
Dale Critchley, pensions policy manager at Aviva, said the figures showed an 8% contribution level would not meet the minister’s target.
Retirement income gap
“Next year we’ll see the first contribution rise and in 2019 it will reach a total of 8%,” he said. “When it reaches that point, those who have stayed in their workplace pension scheme will be putting a reasonable amount into their pension pot. But, as our figures show, even saving at 8% for 40 years may not be enough to bridge the income gap at retirement.”
Critics also point out that government pension policies are relatively new and millions of current savers do not have 40 years left to work to save the cash the minister says they need.
“This target is for people who are saving for 40 years, which means joining their workplace pension scheme in their 20s,” said Critchley.
“Many in their 30s, 40s and 50s who have no pension savings and are just now being auto-enrolled. They should consider their options to achieve their target income. It could mean saving well above the minimum auto-enrolment contributions or working longer than they plan to.”
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