Many unprepared for retirement

MILLIONS of 'grey consumers' are still not financially prepared for retirement, according to a report released today.

Research from market analysts Mintel found that among those adults who have not yet retired, only around half of 45 to 54-year-olds (52%) and 55 to 64-year-olds (46%) contribute to a pension product.

'The notion that so many people of this age are not making proper retirement provisions is clearly alarming and it implies that these people are at risk of spending their retirement in poverty,' said Ian Stewart, senior finance analyst at Mintel. 'Time is running out for these consumers, and they seriously need to consider how they plan to fund their retirement.

'Those aged 45 to 54, in particular, should be concentrating more on their future financial security, as they are often in a prime position to do so. For many, they are at the peak of their income, the kids may have left home, and the mortgage may be about to be paid off.'

Even among those who are putting money aside for their future, many are simply not saving enough, the report found. Although three in five (60%) non-retired 45 to 64-year-olds make regular, monthly contributions to a pension, a savings account or an investment product, as many as 43% of these consumers save less than £100 a month.

Many are clearly not doing enough to provide for a comfortable retirement, as these contributions will do little to reduce the retirement savings gap. Almost half (44%) of adults of this age group called for more favourable saving conditions. One in three (32%) said they would save more 'if they had more money left at the end of the month' and a further one in four (26%) said they would save more 'if they earned more'.

Today, only 12% of non-retired 'grey consumers' feel that 'a pension is still the best way to save for retirement'. In fact, almost a quarter (21%) of these adults feel that 'alternative investments, such as ISAs, property and shares, are a much better way to save for retirement than pensions', the report found.

The effect of bad publicity surrounding pensions has clearly had an effect as one in five (19%) also admit to having 'been put off of pensions for a number of reasons, such as mis-selling, falling annuity rates, and an uncertain stock market'.

Mr Stewart said: "Under-performing pension funds and scandals in the private sector have resulted in a widespread mistrust of pensions. There have been numerous reports of pension funds having been poorly invested, leaving consumers with less money than was originally paid into the fund.The recent boom in the property sector has also helped turn consumers against pensions.'

Savings products appear to have paled in comparison to property, with some 40% of adults aged 45 and over agreeing that 'they would prefer to invest their money in property rather than in savings products'. This figure rises to 54% amongst 45 to 54-year-olds.

'The recent rise in property values, coupled with a poorly performing stock market, has given the impression that property is the best investment. Unfortunately, this performance is not expected to continue. While a crash is not necessarily on the cards, there are signs that the property market is slowing significantly.

"Consumers expecting to depend on their property as a means of retirement income could be in for a rude awakening if property prices do fall. While property alone is generally not enough to provide a sufficient retirement income, some consumers may be depending on their property to supplement their retirement income,' Mr Stewart added.

'Grey consumers' already account for some 40% of the entire British population, with the proportion of adults in this age group expected to increase steadily over the coming years. Indeed, by 2028 nearer half (47%) of the population will be aged over 45, making this age group the fastest growing segment of the UK's population.

'Longer life expectancy combined with a slowing birth rate means that there will continue to be a smaller number of workers supporting a larger number of pensioners,' said Mr Stewart. 'All this puts ever increasing pressure on the state pension system. What is more, as people are living longer, annuity rates are likely to decrease as the funds will have to stretch further.'

A nationally representative sample of 1,013 adults aged 45 and over were questioned for the survey.