Over 60s ‘throwing away’ £1.75bn in retirement savings

Britons aged over 60 are missing out on up to £1.75bn in pension savings by opting out of their workplace pensions, according to new figures released by Royal London.

An analysis of the mutual insurer’s auto-enrolment book showed that while opt-out rates remained below 10 per cent across all other age groups they rose significantly for the over 60s, with almost one in four (23%) choosing to opt out. This finding was in line with figures issued by other auto-enrolment providers such as NEST, Royal London noted.

The company also analysed the impact this move would have on someone’s retirement savings. If a person aged sixty, earning the average UK wage, was auto-enrolled into a pension scheme and made the minimum of 8% contributions, then they would have amassed a retirement pot of £13,980 by the time they reached the age of 65.

Given that pension contributions are made up of an employee contribution, employer contribution and tax relief from the government, scheme members would only need to contribute just over £6,600 of their own money to achieve this outcome, the insurer said. This meant that by opting out of their pension each member could be missing out on up to £7,000 each.

Royal London added that office Labour Force Survey data showed there were approximately 1.1 million people aged 60 or over in full-time employment in the UK, resulting in more than 250,000 people being affected. If each of those individuals stood to lose up to £7,000 each, then collectively this group would be missing out on as much as £1.75bn in retirement savings by opting out.

The insurer attributed the high opt-out rate in this age group to people feeling they had already saved enough into a pension, or thinking they were too close to retirement to make any real difference to their retirement prospects. But it warned that by opting out, these individuals were missing out on employer contributions, tax relief and investment growth, which could “significantly improve” their retirement income.

Royal London pension specialist Helen Morrissey said: “It is understandable that someone at the age of 60 might think it is too late to save enough to make a difference to their retirement income, but they are wrong. Our figures show older workers are throwing away thousands of pounds on retirement income by opting out of their scheme. We would urge anyone thinking of opting out of their auto-enrolment scheme to think twice before doing so.”

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