Number of forty-somethings saving enough for old age in decline

The number of 40-somethings who are saving enough for their old age has shown a 'worrying' decline over the past year, a report has found.

People aged in their 40s often find themselves juggling several big financial outgoings. Picture: Getty Images/iStockphoto

While the proportion of people aged in their 30s and 50s who are saving adequately for their retirement has increased, the share of people aged in their 40s who are doing so has edged downwards, from 57 per cent in 2015 to 53 per cent in 2016.

The report, compiled by Scottish Widows, defined people as saving adequately if they are putting aside at least 12 per cent of their income towards their retirement including any employer contributions into a pension – or they expect their main retirement income to come from a “gold-plated” defined benefit (DB) pension, such as a final salary scheme.

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It also found the proportion of people in their 40s who are not saving towards their retirement has increased from 16 per cent in 2015 to 19 per cent now.

Despite many having spent two decades on the career ladder, people aged in their 40s often find themselves juggling several big financial outgoings while also trying to shore up cash for their retirement.

The report said: “As first-time parents get older, and our own parents survive much longer than they would have done in the past, today’s 40-to-49-year-olds are being squeezed more acutely than ever before.

“Of the 40- somethings we spoke to, more than a third (37 per cent) of those who aren’t currently working are looking after children and almost a fifth (18 per cent) are caring for an adult.”

The research also found the percentage of people in their 30s who are saving adequately for retirement has increased, from 52 per cent in 2015 to 53 per cent.

It marks the first time the survey has recorded people aged in their 30s preparing as well for their retirement as those in their 40s.

And the proportion of people aged in their 50s who are saving adequately has increased from 61 per cent in 2015 to 64 per cent now.

Overall, 56 per cent of people were found to be putting enough money away for an adequate retirement income – a figure which is unchanged from a year ago, despite automatic enrolment into workplace pensions continuing to roll out.

Fewer people will have a DB pension as their main source of income, with 24 per cent relying on such a scheme, compared with 28 per cent in 2015. DB pensions are often described as gold-plated because they come with guaranteed perks.

The percentages of men and women saving adequately – at 60 per cent and 52 per cent respectively – have also remained the same as last year’s levels.

Robert Cochran, a retirement expert at Scottish Widows, said: “It is disappointing to see that savings levels are starting to plateau. Particularly worrying is the fact that savings levels among those in their 40s drop off at a time in life when retirement may be within 20 years.”