How are Brits’ pensions performing?
34% of people did not contribute to a pension
In the midst of increased media attention and the popularity of auto-enrolment, how has pension performance changed over time?
Using data from personal pensions and stocks and shares ISA provider True Potential Investor’s quarterly Tackling The Savings Gap: Consumer Savings and Debt Data report, we investigate how Brits’ pensions attitudes have altered over time between Q1 2016 and Q3 2017.
With awareness on the up, we would expect to see a reduction in the number of people who fail to contribute to a pension each quarter. What do the statistics show?
34% of people did not contribute to a pension in Q1 2016, according to the report’s surveying. 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%).
Women are more likely to skip pension payments than men. 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.
How much are we contributing?
On average, how much are we contributing to our pensions 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.
The lowest average pension contribution was found in Q3 2017, when it stood at just £203. 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?
Other than Q3 2017, Brits most often contribute between £1 and £300 to their pension pot, as exemplified in the quarters analysed.
Pension contributions have been found to fluctuate hugely on a quarter-by-quarter basis. 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.
Even if contributions fluctuate, even the smallest amounts can support the growth of our pension funds by the time we retire.
On average, we spend £4.70 per day on regretted purchases, including food, clothes, alcohol and going out, research has found. 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.
Over time, the smallest contributions towards our pensions can evidently make a difference. 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.
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