British savers will have to find an additional £10,000 each year from now until they retire if the nation is to close the growing so-called “savings gap” between incomes and retirement needs, according to a new report from Deloitte.
The firm forecasts that the savings gap could hit £350bn by 2050 – almost £32bn more than estimated just five years ago. And if the population grows more quickly, Deloitte said the gap could be even bigger, topping £374bn by 2050.
The report argues that a combination of strong population growth, pressure on public spending, the gradual closure of defined benefit pension schemes and the rising cost of healthcare are all contributing to the growing gap between what people earn and what they will need to save in order to be able to retire.
Andrew Power, an investment management partner at Deloitte, said: “Despite welcome efforts by the government to tackle the savings gap through auto-enrolment and raising the pensions age, challenges still exist. People are living longer; many would rather spend today rather than save for tomorrow; and few know how much they actually have tucked away.”
“Separately, the government is no longer as generous with tax incentives,” he added. “If savers want a particular standard of living at retirement, then they will need a greater awareness of what must be saved today.”
Deloitte said that the investment management industry needs to work with government in order to motivate people to save more. Mark Ward, head of investment management, said: “Savings products should be simple and jargon-free and providers will need to be transparent on what they can achieve in terms of savings.”