Scotland bucks wider UK trend as proportion of adequate savers continues to rise

Bucking the wider UK trend, the nation saw an increase in the proportion of people saving adequately for their retirement for the third year in a row.

Almost two-thirds (61 per cent) of people in Scotland are now saving adequately for their retirement, up from 57 per cent last year, and 55 per cent the year before.

This puts Scotland well ahead of the UK average of 56 per cent, and makes it the region with the highest proportion of savers across the whole of the UK, joint with Yorkshire and the East of England. The proportion of people not saving in Scotland has also fallen, from 23 per cent in 2015 to 19 per cent this year.

Conversely, in the UK more widely, savings levels are showing signs of steadying at the same time as the number of people expecting to receive a defined benefit pension continues to fall.

While the proportion of people saving adequately for retirement, buoyed by the introduction of auto-enrolment, had been on an upward trajectory in the UK since 2013, in 2016 the number stayed static year-on-year at 56 per cent. At the same time, the proportion of people across the UK relying mainly on defined benefit (DB) pensions for their retirement income now stands at 24 per cent, down from 28 per cent last year, and well below the 36 per cent recorded in the first edition of the Retirement Report in 2005.

Despite the positive picture in Scotland, this continued growth may be at risk, as two thirds of people (60 per cent) believe they won’t be able to save any more in the next 12 months than they do now – higher than the UK average of 58 per cent.

In addition, the mean age at which people in Scotland think they can comfortably afford to begin saving for retirement has risen in the past year, to 29.2 years from 28.7 years. This comes at the same time as the age at which most people in Scotland would like to retire at has fallen to 62.8 years from 63.1 years last year. The average income people believe they will need for a comfortable retirement has also increased to £24,024, up from £22,941 in 2015.

In the UK more widely, this year’s research revealed a troubling trend among those in the 40-49 year old age group. Jointly with those aged 30-39, the youngest age group in the Scottish Widows Pensions Index, they have the lowest adequate savings levels (53 per cent). This marks the first time that savers in their 30s are preparing for retirement as well as those in their 40s – despite the fact they have an additional decade of earning potential. Furthermore, while the proportion of adequate savers in their 30s has risen from 52 per cent in the past 12 months, among those in their 40s, this figure has dropped from 57 per cent. The number of non-savers in their 40s is also up to 19 per cent this year from 16 per cent in 2015, despite the fact that on average, there are fewer people not saving this year compared to last.

In spite of steady savings levels across the UK more widely, the research points to the positive role that auto-enrolment is likely to continue to play in the coming years – with current figures reflecting levels of savings made by many at the very start of their saving journey. When excluding those who have a defined benefit pension (i.e. looking only at those covered by auto-enrolment), the proportion of people across the UK saving adequately has actually increased in the past 12 months to 43 per cent from 39 per cent. The impact of auto-enrolment is also clear when looking at the non-savers: women (24 per cent), the self-employed (24 per cent), and those working for small businesses (25 per cent) are all disproportionately not saving – three groups who are either currently less likely to be eligible for auto-enrolment, or yet to feel the full benefit of the relatively new legislation.

When it comes to the impact of the EU Referendum result, 33 per cent of people in Scotland pre-Brexit said they felt optimistic about their retirement, this fell to just 13 per cent following the vote.

However, the impact may be limited, with 48 per cent of people in Scotland saying Brexit will not affect the amount they will save, and only 15 per cent saying they will be putting away less money as a result. In fact, the uncertainty around the vote may even have spurred people on to engage more with saving, with 26 per cent of young people (18-24 year olds) across the UK suggesting they will now put away more money.

Robert Cochran, Retirement Expert at Scottish Widows, said: “It’s very encouraging to see that people in Scotland are continuing to be savvy about saving and punching above their weight in comparison to the rest of the UK. Now what is important is that we maintain this momentum to ensure that everyone continues on this upward trajectory towards preparing adequately for later life.

“Auto-enrolment has already brought six million new workplace savers into pensions and with the minimum contributions for employers and employees set to rise in coming years, we expect average levels of savings continue will rise. Critical to maintaining this trend will be encouraging people to save more than the minimum contribution, as well as providing the right support to those who are not covered by auto-enrolment. We are calling for better support to help those employed in small businesses and the self-employed realise the benefits that auto-enrolment has already brought to so many.”

To coincide with Pension Awareness Day, Scottish Widows and Pension Geeks will be embarking upon a six-city tour to provide the UK population with practical advice and tips to help them understand the importance of saving for retirement.

Individuals and businesses will be able to visit the pop-up interactive pension information centre in Edinburgh, Birmingham, Leeds, Liverpool, Bristol and Brighton between 12 and 17 September. The bus will transport a team of experts to deliver a jam-packed schedule of talks and interactive sessions, including top tips on how to get planning for the future and one-to-one support for everyone, from those who have not yet started saving into a pension to people already thinking about their options at retirement.