Pensions savings fall below pre-recession levels

Pensions savings have hit their lowest levels since 2006 as the long term effects of the downturn start to impact on savers' retirement plans, according to research by Scottish Widows.

Later-life saving has been rising slowly in recent years but has taken a dramatic drop since 2009 to hit its lowest level for four years, according to the sixth annual Scottish Widows UK Pensions Report 2010.

Of those saving less, 41% blame the economic downturn while 18% say the recession has put retirement lower on their list of priorities.

Since 2009, the number of people saving adequately has fallen 6% to 48%, according to the Scottish Widows pensions index, which tracks the percentage saving adequately for retirement.

In addition, the index suggests a fifth (21%) of people who could and should are saving nothing at all for retirement.

Scottish Widows' average savings ratio, which tracks the percentage of income saved for retirement by workers not expecting to get their main retirement payouts from a defined-benefit scheme, is also down at 9.2%.

This is a fall of 0.1% year-on-year but almost 3% short of the 12% Scottish Widows believes people should be saving to achieve a comfortable retirement.

Both indexes are based on those aged 30 or over earning at least £10,000 a year.

Women over 50 have been hit the hardest, according to the report, with the index showing a fall from 52% saving adequately in 2009, to 38% in 2010.

However, the report suggests the pensions gender gap is narrowing, down to 9% compared to 12% last year.

Women are still fall far behind men though with only 43% saving adequately compared to 47% last year. Among men, 52% are saving adequately this year compared to 59% in 2009.

Scottish Widows head of pensions market development Ian Naismith says: "The previous three years saw a steady rise in the number of people saving adequately for retirement, but now we are seeing the full impact of the downturn on people's retirement pots.

"Our definitive pensions index and average savings ratio have revealed year on year increases in pensions savings, but the effect of the credit crunch has handed a blow to the nation and this has led to a decline in saving for retirement.

"There is still a great deal that needs to be done from both the Government and the industry to better encourage pensions savings for the long term, particularly in the current economic environment."

The Scottish Widows UK Pensions Report 2010 suggests someone saving adequately for retirement is likely to be male, working in the public sector and a high earner. By comparison a non-saver is more likely to be a parent and self-employed.