Auto-enrolment, the landmark pensions shake-up that was rolled out to much fanfare this week, could inadvertently lead millions of people to “sleepwalk into a retirement of relative poverty”, warns the boss of the world’s largest independent financial advisory firm.
Nigel Green, the chief executive of the deVere Group, says that the scheme’s maximum contribution, equivalent to 8 per cent of earnings, is not sufficient to guarantee the financial welfare of retirees.
He explains: “8 per cent is nowhere near enough for most of today’s working population to be able to maintain their current standard of living in retirement.Â The reality is that people will need to put aside a lot more than that in order to have any prospect of a financially secure retirement.
“For instance, 30-year-olds should, ideally, be saving at least 15 per cent of their earnings, and older people much more. Â After all, a 45-year-old who plans to retire at 65, only has 240 pay days to achieve their end objective.”
“It has not been made explicit enough by the government’s public awareness campaign that the 8 per cent is designed as a starting point only.Â It is a major concern that people will assume this percentage will be a sufficient level at any age, when it’s clearly not, and this could mean some could sleepwalk into a retirement of relative poverty.
“The government must do much more to educate employers and employees to hammer this message home.Â The slick ‘I’m in’ TV ads starring Nick Hewer and Karren Brady alone are not enough.”
He adds: “A lack of education on this matter will result in some people reaching retirement and finding their pension pots are far smaller than they had expected.”
In direct response to these concerns, on Monday, the day auto-enrolment was rolled out, the deVere Group launched a new iPhone app to help people identify the shortfall between the amount they want in retirement and the amount they have saved.