Pension saving is usually assumed to take place through a combination of workplace and personal arrangements, which, when combined with the state pension, can provide a healthy sum for retirement. However, beneficial help to build up a pension fund such as auto-enrolment has only been introduced in recent years, and still remains a relatively new concept. In addition, many of the older pension schemes, such as Defined Benefit which provides a secure and increasing income for life, have been phased out and replaced with alternatives.
Mr Cochran said: “2020 has taken a heavy toll on many people’s finances, with some putting retirement savings on the back burner.
“But as we look forward, it’s important that people stay focused on the long-term benefits of a pension, and ensure they’re preparing adequately for retirement.
“Looking back over recent years, we’re seeing a concerning trend. As we enter 2021, a ‘forgotten middle’ is emerging – those in their 40s and early 50s who are saving less and will therefore face financial hardship in retirement.
“The number of 40-55 year olds saving adequately has dropped to its lowest level in five years at just 29 percent, with over-55s doing significantly better – 48 percent.
“This gap is concerning, particularly as we see the cost of living rise across the UK, and more people prioritising short-term financial pressures and day-to-day living costs.”
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The ‘forgotten middle’ group have also been targeted by the end of schemes which are viewed as more generous.
Some will provide a significant amount of money which will increase each year, while others look at a person’s final salary to calculate how much they will receive.
But with those in the 40-55 age category generally just missing this kind of arrangement, the impacts are likely to be palpably felt.
Mr Cochran went on to explain: “We’ve seen over-55s reap the benefits of going the Defined Benefit pension schemes that were so popular in the 80s and early 90s, while much younger workers have benefitted from spending most of their working lives covered by the introduction of auto-enrolment from 2012.
“But these successes have left a group missing out – those in their 40s and 50s who have missed out on the Defined Benefit schemes that closed rapidly over the 90s and early noughties.
“Over the last decade there has been a 71 decline in these types of pension schemes being open saving, with employers struggling to provide these kinds of generous benefits as people lived longer in retirement.
“As these schemes dies out, many now in this age group waited years for the introduction of auto-enrolment, resulting in reduced saving potential and poorer retirement prospects.”
But one benefit applicable to this age category is their distance from retirement, which may prove advantageous for getting back on track.
Britons are advised to look at all of their options as soon as possible to ensure they are progressing in the appropriate direction.
They should also lay out key goals for retirement, and check these are being met periodically.
Mr Cochran concluded: “Though retirement might still seem a way off for many, more than half in this age bracket feel unprepared for it, so the time is now to be proactive about retirement planning.
“The sooner you start planning, the longer your savings will have to grow and reap the tax benefits on the contributions you’re making.
“The good news is that for those who haven’t thought seriously about their retirement plan, it’s not too late.
“It’s important to not put your head in the sand – be proactive and find out exactly where you stand and what you’re entitled to.”
When looking at pension saving and planning for retirement, Britons are generally advised to speak to an expert on the matter.
These individuals can often provide specific and tailored guidance to suit a person’s circumstances.
Alternatively, websites such as the Money Advice Service and Pension Wise are run and backed by the government, meaning this assistance is free and impartial.