"Those who fail to save beyond the default requirements of the scheme will be faced with a significant income gap."
Its research found the average saver believes they need an annual income of £25,000 for a comfortable retirement – but at current saving rates, their total pension pot will only provide an income of £18,500 per year.
‘Disengaged’ savers, who do not know how much they are saving or if they are saving anything at all, make up 38% of the population and are only set to receive £13,000 per year if automatically enrolled – a shortfall of £12,000. Scottish Widows proposes that increasing minimum contribution rates could help bridge the gap for ‘disengaged’ savers.
Just 32% of self-employed people between the age of 20 and 39 are saving adequately for retirement, while 41% save nothing at all. While their income expectations for later life are slightly lower than average, they’re still set to experience a sizeable annual shortfall of £5,000 by the time they reach retirement.
Those who might be more vulnerable to financial pressures, or on lower-middle weighted incomes, have lower expectations, citing £17,500 as the annual income needed in retirement. They still, however, face a significant gap of £3,200 between their expectations, and their projected retirement income of £14,000.
Additionally, 20% of those currently earning between £10,000 and £20,000 per annum believe they will never be in a position to retire.
Pete Glancy, head of policy at Scottish Widows, said: “Automatic enrolment is improving the retirement prospects for many, but those who fail to save beyond the default requirements of the scheme will be faced with a significant income gap.
“The first step in closing this gap is acknowledging the interlocking challenges faced by different groups, from the self-employed through to those who simply don’t know how much they are saving.
“We need to see reform for the self-employed on a par with automatic enrolment and the introduction of new minimum and default contribution levels to address the issue of the disengaged generation.”
