I was at the House of Lords yesterday evening as a guest of the Scottish Widows, for the launch of their annual ‘Women and Pensions Report’.

Having not yet had a chance to study the report in any detail, I am not in a position to make any significant comment on the findings. I will however look at this later this year, and this topic may well form part of our 2012 seminars and workshops as well.

There was however one recurring theme from the speakers (which included The Minister for Pensions, and the former Shadow Minister) which I thought was of immediate relevance to the blog, and that was regarding the average pension fund size at retirement date.

The Scottish Widows report finds that the average pension pot for a female at retirement date is less than £10k, that of a similar age man more than £50k.

For the purposes of this post, I’m not particularly interested in exact figures, or even the marked difference in pension fund between male and female (which is, incidentally, a disgraceful comment on our society). What I am interested in is the low level of pension fund savings for both sexes at retirement.

Jelf’s own evidence shows that the average pension fund at retirement is around the £37k mark (source: JEB annuity bureau 24/08/11), which probably supports the above findings.

The real issue here is that none of the above funds will create anything like the income that most people would need to retire on. For instance, the £37k figure would produce a pension of less than £2,500* per annum!

Those that have been following the DRA story over the last year will realise that this is not just a problem for the employee, but is potentially also a problem for the employer. Rather than recreate the wheel, I would suggest you look at one of my earlier posts on this subject which can be viewed here:

https://www.jelfgroup.com/blog/2011/02/dra-and-pensions/

Now I do understand that this is not the full story, and the employee may have more than one pension fund to take benefits from. There does also seem to be some political will to enable employees to combine various small pension funds more easily (which is to be welcomed), but the underlying point is that, as a nation, we are not saving enough to provide the employee and employer with an exit strategy at the end of working life.

Major problem, and not one that the funding levels of auto-enrolment will make any significant inroads into unfortunately.

No easy answers here, but suffice to say that encouraging higher levels of pension savings, good investment options,and careful planning around retirement outcomes will all become more, not less, important for employees and employers in the coming years.

Best regards

Steve

* (Unisex annuity rates, age 65, single life, no escalation, no guarnatee).