Only a handful believe the state pension will be enough to live on, yet few are making adequate provision for when they stop work, with just 23% of the Scottish workforce paying into a company retirement plan, according to figures this week from Prudential.
In a bid to get more people saving, the Government this week introduced automatic enrolment into workplace schemes for over-21s earning more than £8105 a year and not already contributing.
Very large firms began auto- enrolling this week, with more to follow next year, while those with fewer than 500 staff will begin in 2014 and smaller businesses in 2015. Contribution levels will start low and rise gradually, until by 2018 they reach a total of 8% of salary.
Nest, the national not-for-profit pension scheme now open for business, said: "The new rules will mean that for less than the cost of a pint per week savers will get nearly £3 from their employer and almost 60p from tax relief put into their pot as well, meaning the money going into their pot will total just under £6 per week, or £25.74 per month. By 2018, if they keep contributing, they will be putting aside on average about £12 per week of their own pay, in return for almost £9 from their employer and nearly £3 in tax relief. Total weekly contributions will come to an average of £23.67, equivalent to £102.95 going into their pot each month."
But even if the We're In campaign succeeds in lowering an expected opt-out level of 30%, the initial minimum contributions – 1% of salary by employees and 1% from the employer – are nowhere near enough to provide a meaningful retirement income.
And anyone with a smaller employer who waits until they are auto-enrolled will have missed several years of tax relief and possible investment growth, potentially slicing thousands of pounds from their pension pot.
Because of this, experts are urging anyone not already paying into a plan to act now and start putting away whatever they can manage.
David Scott, of Linlithgow-based independent financial advisers Alan Steel Asset Management, said: "I encourage my clients to push themselves to save as much as they can afford. There is not a hard and fast amount they should pay – the maximum annual allowance is £50,000.
"If an employer has a scheme, then I would encourage people to join it, as more often than not, the employer will contribute. This is free money in my book and it is madness to turn this down. However, take advice on the plan before signing up. If there is no employer scheme, then at that stage you would consider personal pension plans and, again, take advice from a reputable adviser."
Figures from Axa Wealth, meanwhile, show that four out of 10 people do not pay into any kind of pension. Mr Scott said: "Many younger clients I see don't have much scope to save because they have children and are often overstretched as it is. Pensions and savings for retirement, therefore, take a back seat."
He added: "It could also be that they are untrusting of pensions due to poor performance, or they have a lack of knowledge and understanding of the product and pension rules. "
However, pension plans – workplace or personal – remain the most cost-effective way to save for old age, even if that means cutting back on more immediately gratifying spending to free up the cash.
Mr Scott explained: "You get tax relief on your contributions at your highest rate and the funds are invested in a tax-efficient environment."
An employee on the UK median salary of £26,200 who signed up this week for the legal minimum contributions would benefit from £6000 in employer contributions and Government tax relief into their pension pot if they stayed enrolled for 10 years, Fidelity International said this week.
But even staying enrolled from age 20 for 46 years would only produce a monthly pension income of £471, according to advisers AWD Chase de Vere.
Paying in for the same period from age 30 would deliver £292 a month in retirement.
Jon Dixon at AWD said: "While auto- enrolment could provide a great foundation for people's retirement planning, it is unlikely to give them the standard of living they would want in retirement... they must also look to make additional pension contributions and to invest regularly in cash and/or stocks and shares Isas."
How much should your workplace pension cost? Labour leader Ed Milliband this week launched an attack on pension charges, saying they need to come down to below 1%. National scheme Nest, however, levies an annual management charge of 0.3% on members' total funds under management, plus a charge on contributions of 1.8% as they are made, which works out as broadly equivalent to 0.5% for most savers – similar to the low charges currently enjoyed by members of large workplace schemes.
Tom McPhail, pensions expert at brokers Hargreaves Lansdown, said: "Mr Miliband may not be aware the DWP has just published research showing the average charge across a wide range of defined contribution workplace pensions is already below 1% and it is still falling, and that pension charges have less impact on pension payouts than a range of other factors. The most important factor is how much you pay into a pension. If you don't pay enough in, you won't get enough out."
Ghill Donald began paying into personal pension plans for his daughters, Jessica, 15, and Tessa, 10, when falling interest rates slashed the return on their savings accounts.
Mr Donald, who was already paying into his own company plan, took advantage of the fact that non-taxpayers can invest – or have invested on their behalf – up to £2880 a year and still benefit from basic rate tax relief, increasing the value to £3600.
The 49-year-old from Aberlady, East Lothian, explained: "I grew up with the message that saving was a good thing, and I wanted to make sure my girls felt that way too. I realised that if you paid even a small amount into a pension in your teens, after 40 or 45 years you would have something fantastic."
Mr Donald, who owns a marketing agency, initially invested with Scottish Widows but is moving his daughters' cash to Invesco Perpetual in the hope of achieving an even better return.
He added: "The girls are quite sensible and they really like the idea of having their own pensions."
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