On the go: Workers in the UK need to save a total of 13 per cent of their annual household income from the age of 25 and aim to have seven times their annual household income saved by age 68, according to Fidelity International.
Auto-enrolment savings will account for 8 per cent of this, but employees will need to save 5 per cent more to reach a 13 per cent savings rate.
This level of saving is needed to replace 35 per cent of pre-retirement income, with the rest being supplemented by any state pension provisions, to reach the expected total income replacement rate of 55-85 per cent, according to Fidelity’s analysis.
There is some debate over what constitutes an adequate savings rate. The Association of Consulting Actuaries has previously said, for example, that the auto-enrolment contribution level should be set at 16 per cent.
According to Fidelity, UK workers need to set aside less than those in the US, Germany, Hong Kong, and Canada, and a comparable amount to those in Japan, with the UK benefitting from the one of the lowest savings milestone and savings rate compared with its global counterparts.
The discrepancy between countries is a consequence of regional-specific factors including observed spending and saving behaviour, taxation, structure of state pension and health insurance schemes, mortality, wage growth, inflation, assumed retirement age and capital market assumptions.
Commenting on the research, Carolyn Jones, head of pension policy and product at Fidelity International, said: “Saving enough for retirement is becoming increasingly viewed as an obstacle not only by employees, but also employers; it is a challenge faced by everyone, but most people have no idea what enough is.”
