High Earners Who Will End Up As Poorest Pensioners

Many of Britain’s highest earners will end up among the nation’s poorest paid pensioners because they are not saving enough for retirement.

The warning comes from pensions minister Steve Webb, who says official figures show 6 million professional high earners are not saving enough money to maintain their lifestyles when they give up work.

The study from the Department of Work and Pensions reveals middle and high earning professionals face the steepest fall in living standards when they retire as their incomes drop the most.

“Everyone wants a relaxed and comfortable retirement without any financial worries,” said the minister.

“But for millions this won’t be the realty as they are simply not putting enough away into their pension and savings to maintain their current lifestyles. It’s about spending now and not thinking about the future.

Underfunded professionals

“Anyone who wants a significant amount out of their pension needs to consider putting a significant amount in.”

The government study revealed professionals will have to put off their retirement by at least eight years to save enough cash to keep them in the style to which they are accustomed in retirement.

The report focuses on a hole in government pension policy. New auto-enrolment retirement schemes are aimed at lower paid workers rather than high earners, but the figures show that half the 12 million people who are likely to have inadequate retirement income are high earners.

They are likely to have a private pension, but the odds are it is underfunded and professionals are likely to have a shock about their actual retirement in comparison to what they feel they need or expect.

“Not saving enough cash for retirement is not just a problem for those on low incomes who cannot afford to set money aside, but high earners have the same issues as well,” said Webb.

Bottom of the pile

“Our figures show that those who have enjoyed a high income while working are likely to find they are at the bottom of the pile when they retire.”

The study discloses that a million high earners are likely to have less than half the retirement income they feel is enough to live on.

Around 400,000 of professional, highly paid workers in jobs that pay more than £35,400 will suddenly find they are among the poorest 20% of pensioners.

The Department of Work and Pensions calculate some earning £20,000 a year only needs to save a small amount extra on top of 8% of their salary to achieve a decent pension, while high rate tax payers earning £40,800 must put an extra £50 a week – £2,460 a year – away on top of their pension contributions.