Retirement funds suffering as households feel the pinch

Published on Sunday 29 June 2008 21:17

ONE in four people feel worse off now than they did five years ago, a report out today will reveal. The Scottish Widows Pension Report, which tracks savings behaviour, found that confidence among consumers is low, with a third of people feeling pessimistic about their short-term financial prospects.

The credit crunch means more people are worried about having nothing to live on in retirement, but too few people are saving enough, the report said.

Although the percentage of income being saved by employees in the UK has risen, the improvement has been driven by an increase in non-pension savings and 59 per cent of people say they will not be able to put more money away over the next year.

This is partly due to increases in household costs. The report found that on average, people believe they need a household income of 40,000 in order to feel comfortable, up from 36,000 a year ago.

"While a number of people are beginning to save more consistently within short-term savings vehicles, such as individual savings accounts, many just don't see how they can afford to put anything aside," said Ian Naismith, head of pensions market development at Scottish Widows.

"With the cost of living rising and the nation struggling to make ends meet, the outlook isn't getting any brighter."

The report also revealed that public sector employees, workers aged 50 or over and those earning between 30,000 and 50,000 a year are most likely to be making sufficient savings.

And men are more likely to be saving adequately than women. While the gender gap has closed slightly in the past year, with 22 per cent of women classed as non-savers compared with 31 per cent in the 2007 report, women are more likely to save only for the short term.