Workers face £51,000 pension gap

THE average worker is facing a £51,000 shortfall in the amount they need to save into a pension to have a comfortable retirement, research claimed today.

Market analyst Datamonitor said people had saved an average of just £30,000 into both private and company pensions, and it warned they needed to boost this by at least £51,000 if they were to retire on two-thirds of their final salary.

It warned that a failure to put the extra money aside would cut retirement income by around £4,000 a year.

It added that if people did not make up the shortfall they would be living off just £13,000 once they stopped working, taking into account the money they would get from the basic State pension and State second pension.

Oliver Guirdham, life and pensions analyst at Datamonitor, said: 'We are talking about the funds that people will need on the day that they retire, so for many people there is still time to adjust.

'UK citizens have built up relatively large private pensions savings relative to many European countries, however, there is still the need for more and the Government needs to help them do this.'

He said Government initiatives aimed at boosting savings, such as the launch of low-cost stakeholder pensions, had largely failed.

He added that people's pension pots had been hit hard by falling stock markets between 2000 and 2003, and the Government had exacerbated the problem by removing tax credits from pension schemes, reducing the amount accumulated by around £5bn a year.

But despite the UK's current shortfall in pension saving, the country still has the largest private pensions market in Europe.

At the end of 2003, private pension funds in the UK were collectively worth £1.9 trillion, dwarfing the next largest, the Netherlands, where people have £500bn.

However, Datamonitor said one reason for this lower level of saving was that in many European countries people were more reliant on the State to provide them with a retirement income, with people getting up to 80% of their salary from the State pension during retirement.

It said as a result the average worker in France had put just €1,000 (£683) into a private pension, while in Italy they had saved only €3,000.

But the group warned that this high level of State provision was not sustainable due to rapidly ageing populations putting an increasing strain on those who were still working.