Think Money

Think Money

July 03, 2009 06:44 ET

Debt management could help struggling pension savers

LONDON, UNITED KINGDOM--(Marketwire - July 3, 2009) - Responding to a new survey suggesting that many British workers are saving inadequately for their retirement, financial solutions company Think Money has advised workers to ensure they plan their finances well in order to avoid potential financial difficulty in retirement.

In its latest pensions report, Scottish Widows said that the number of people saving adequately for retirement had risen from 51% in 2008 to 54% in 2009. Its Average Savings Ratio - which measures the percentage of income being saved for retirement by workers who do not expect to get their main retirement income from a defined-benefit scheme - rose from 8.7% in 2008 to 9.3% in 2009, the highest level since the annual survey began in 2005.

However, the survey also revealed some findings that did not paint such a positive picture.

Although the number of people saving adequately for retirement had risen slightly, the gender gap had widened - 59% of men were saving adequately, compared with just 47% of women. This 12% gap was an increase on last year's 9%. The survey also found that the over-50s age group were the most likely to have cut their savings in the last year (21%).

Scottish Widows said that the 'impact of the recession is starting to take its toll' on savers, with 36% of people reporting that they could not afford to save any more than they already are. It added that 28% of all workers felt insecure in their current employment, leading to uncertainty regarding pensions savings.

But failing to save adequately for retirement could be setting workers up for severe financial difficulties in later life, according to Melanie Taylor, Head of Corporate Relations for Think Money.

"While it's a positive sign that more people are saving adequately for retirement than this time last year, it still stands that 46% of people are not saving adequately.

"Pensions are important for ensuring financial security in later life. Without a personal pension, people may be restricted to a state pension, which is likely to be significantly less than they are living on now."

Mrs Taylor added that in the current economic climate, some people may have been unable to save due to other commitments, such as bills or debt repayments.

"Some costs of living, such as energy for the home and petrol, are significantly higher than they were only two years ago - which means there is a lot more pressure on people's finances. This means some people simply can't afford to put any money into a pension.

"When debt repayments are also involved, the situation can become a lot more difficult. We do advise that people pay off debts before saving, as the interest on debt can grow a lot more quickly than the interest on savings, but people should ensure that they are saving for retirement as soon as they are able to do so.

"Anyone who finds that their debts are becoming difficult to manage should discuss their situation with a professional debt adviser. There are a number of debt solutions available, such as a debt management plan, that can help borrowers to clear their debts and improve their outlook for the future."

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