Media attention and auto-enrolment have pushed pensions to the front of our minds, but how has Britain’s pension performance altered over time?
Each quarter, True Potential Investor — a UK personal pension and investment specialist — creates their Tackling The Savings Gap: Consumer Savings and Debt Data report. The campaign was launched in 2013 and to date has polled 30,000 people to determine current attitudes to pensions, savings and financial knowledge in the UK.
Using findings from these results from Q1 2016 to Q3 2017, we examine how pension attitudes have shifted across a number of key areas:
Percentage of people saving nothing towards their pension
As we wake up to the importance of our pensions, we would expect that the number of people contributing nothing to their pension would be in decline — but how do the stats line up?
In Q1 2016, 34% of people did not put anything towards their pension. By Q3 2017, this figure had increased significantly to 45%, rather than decreasing as expected. In fact, in 2016 and 2017 so far, Q2 2016 has been the best month for pension contributions; the number of people failing to contribute was at its lowest (29%).
Overall, our analysis of the reports’ findings shows that women are more likely than men to contribute nothing towards their pension. In each of the quarters — with the exception of Q1 2017 when the data was unavailable — a greater number of women failed to contribute. This was at its highest in Q3 2017, when almost half of all women (49%) did not add to their pension.
Average pension contributions
When we are contributing to our pensions, just how much are we adding each month? Of the data available, we contributed the most in Q4 2016, adding £566 on average to our pension pot. This was followed by Q2 2016, with an average monthly contribution of £474.
Despite awareness of pensions rising, Q3 2017 saw an average pension contribution of just £203, the lowest of all available data between 2016 and 2017. However, the Q3 2017 Tackling The Savings Gap report does discuss Britain’s growing debt. On average, UK consumers take on £370 of debt each month, with 33% of those surveyed admitting to having financial worries on a daily basis. As unsecured borrowing rises to £200 billion according to Bank of England data, perhaps Britain’s mounting debt is hindering our pension performance?
With the exception of Q3 2017, UK consumers most commonly contribute between £1 and £300 in the quarters analysed.
The current state of our pensions
As the above analysis shows, there is great fluctuation in our quarterly pension contributions. While highlighting the flexibility offered by personal pensions, it’s clear that our pensions are struggling amongst our other priorities. Illustrated by the changeable monthly contributions, debt and other monthly outgoings could be consuming our finances, stunting our financial planning for retirement.
However, while the amount we set aside may fluctuate, the impact of even the smallest contribution can significantly bolster the funds we have available come retirement.
Research from True Potential Investor has found that Brits waste £4.70 per day on purchases that they later regret, such as food, alcohol, clothes and going out. If this amount was invested into a pension in a typical balanced fund for 35 years, it could result in a pension pot of £189,607— enough to fund 8 years in retirement, based on receiving £23,000 annually.
The above highlights how even the smallest of pension contributions can make a difference over time. We need to strike the difficult balance of managing our financial commitments with contributing to our pensions — and the sooner we start, the better we could support ourselves in later life.