Pension plans need 50,000 extra

A new report reveals the average worker in the UK needs to contribute a further 50,000 to their current pension fund.

09:36 09 September 2004

A new report reveals the average worker in the UK needs to contribute at least a further 50,000 to their current pension fund.

The research, undertaken by independent market analyst Datamonitor, found that this was the minimum people needed to add if they were to achieve a comfortable standard of living in retirement.

Without this they would see shortfalls in their retired income, averaging 4,000 per annum. The additional 50,000 per worker would equate to the average individual getting two-thirds of their working salary once retired.

However, there is still time to make these changes. As the life and pensions analyst at Datamonitor, Oliver Guirdham, explains: "We are talking about the funds that people will need on the day that they retire, so for many people there is still time to adjust."

He adds: "The government needs to help them do this. Initiatives in this direction, such as the stakeholder pension, have thus far largely failed."

The current level of savings in private pension funds is only around 30,000 per worker in the UK. Without additional contributions, the average retirement income would be 13,000 per annum, from a combination of state pension and private pensions savings.

The UK has the largest private pension market in Europe, with private pension funds estimated at around 1,900 billion euros in 2003.

In many European countries the level of private pension saving is much lower, with workers relying on the state to provide up to 80 per cent of their working salaries in retirement.

Mr Guirdham believes that countries such as Italy, France and Spain face future problems as a result: "The problem is that the governments of these countries have not found the political will to make the necessary reforms to their pensions systems. If they do not do so they will face a crisis."