Britons face savings 'black hole'

Eight million Britons are failing to save for their retirement and could face eventual poverty, according to a new survey from a leading insurance body.

A further two million people are saving but too little to make a real difference.

In total, more than a third of UK workers are not saving enough for their retirement.

This is despite widespread scepticism as to the future value of the state pension.

Basic cover

'The State of the Nation's Saving' survey, commissioned by the Association of British Insurers (ABI), revealed that only one in fifty people thought that the basic state pension would pay enough to live comfortably on when they retired.

Our survey paints a compelling picture of people who want to take responsibility for their retirement but are worried and uncertain about how to do so Joanne Segars, ABI

In fact most thought that the state pension would be worth little in future, covering only basic bills such as food.

Nevertheless a large number admit that they are not saving enough, with nearly a third not putting anything aside for their retirement.

Just over a third of workers who were not saving said they hoped the government would pick up the tab and pay a better pension, while 29% agreed that they had to look after themselves.

Worried and uncertain

Two-thirds of those questioned said they had fairly bad or very bad understanding of pensions.

Most did not have a clue as to how much they needed to save towards a comfortable retirement.

And a further third of people said they were mainly investing in property for their retirement - not surprising considering the buoyant state of the housing market.

"Our survey paints a compelling picture of people who want to take responsibility for their retirement but are worried and uncertain about how to do so. We need to create a framework that informs, encourages and enables people to make decisions and take ownership," said Joanne Segars, Head of Pensions and Savings at the ABI.

Means test

It is not yet clear how changes in the government pension provision will affect people's plans for saving.

Recently the government launched pension credit, a means tested top-up to the basic state pension.

The new Pension Credit has two elements: The Guarantee Credit and the Savings Credit.

Everyone aged 60 or above will be guaranteed a minimum income of £102.10 a week if they are single, or £155.80 a week for couples.

The Savings Credit has been created to reward pensioners aged 65 and over who have a second pension, or modest savings. The government will pay pensioners 60p for every £1 of income they gain from savings - up to a maximum of £14.79 per week for single pensioners and £19.20 a week for pensioner couples.

The Department of Work and Pensions claims that 5.1 million older people were eligible, and half of pensioner households would be better off by about £400 a year under the credit.

However, critics say that the new structure could discourage people on modest incomes from saving too much.