Money Matters: Middle income workers just as likely to be hit by pensions shortfall
Pensions minister Steve Webb has warned that up to 12 million people will face a shortfall in their pensions despite the introduction of automatic enrolment. Crucially, he pointed out that middle income workers are just as likely to be hit as low paid ones.
"Under-saving is far from being the preserve of low earners," Mr Webb said. "Many on middle and higher incomes clearly need to do much more to ensure that they get the retirement they want."
Exclusive research backs up his concerns. It reveals that one in 10 middle income workers, defined as earning between £30,000-£50,000, has no pension at all, while one in five is currently not making any pension savings.
The figures are being published as part of the Scottish Widows Workplace Pensions Report. It reveals the full scale of the problems facing the squeezed middle-waged. A third of those with no pension are being forced to prioritise paying off debts rather than save for their retirement. A second third is prioritising mortgage payments while the remaining third say they simply need their cash to cover living expenses.
And the research shows that even among those who are saving into a pension, the middle-waged actually face a larger than average income shortfall in retirement. The shortfall is based on people's expectations of how much income they think they will need in retirement compared with how much they are actually saving. Across all income bands the average monthly shortfall stands at £669: for the middle-waged it is £740.
In fact the pension gap between what all UK workers are prepared to save and what they need to is widening. The Government's auto-enrolment programme is designed to help reduce the pension gap facing millions in the future.
But the research revealed significant gaps in people's knowledge about how much they are paying into a pension.