UK Workers Expect to Retire Early, But May Not Be Saving Enough

A new report from insurance company Prudential says British workers expect to retire well before state pension age, but they may be disappointed as one in 10 won’t begin saving for retirement until they are 46.

“As people’s retirements get longer, the responsibility for funding them will shift even further towards individuals,” said Vince Smith-Hughes, a retirement income expert at Prudential. “Pensions are about saving for the long term, so the best way for most people to secure a comfortable retirement is to save as much as possible from as early as possible in their working life.”

Prudential’s “Intergenerational Retirement Study,” which investigated the retirement preparations of different age groups across the country, found that 11% have yet to start saving into a pension, and the average starting age for those who are saving for retirement is 27.

The study also found that most workers in the UK expect to retire before the state-mandated pension age; and younger workers expect to retire much earlier than older workers – almost twice as early. Workers between ages 21 and 30 expect to retire seven and a half years before they reach pension age, while workers between ages 51 and 65 expect to retire just over four years before pension age or less.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

“For many people with a specific retirement date in mind, it is likely that a consultation with a professional financial adviser will help to put a savings plan in place to make sure they meet that goal with sufficient savings in their pension pot,” said Smith-Hughes.

According to the study, 53% of workers under the age of 40 estimate that their retirement incomes will be equal to or below the average incomes of those retiring in 2016. “This means that people who are anything up to 45 years away from retirement are expecting to be able to live on £17,700 or less per year,” said the report, “which of course will be worth considerably less in real terms, when they give up work.”

Prudential’s research also revealed that younger workers aren’t as confident about their retirement prospects as their older counterparts are. Approximately18% of workers under the age of 50 said they are worried that their savings aren’t on track, and that they’ll have to work past their desired retirement age. Another 37% said they fear they have only saved enough to just get by in retirement. Meanwhile, 87% of workers aged 51 to 65 say they are on track to retire when they planned to, the majority of whom expect to live a comfortable retirement.

“The desire to retire as early as possible is completely understandable,” said Smith-Hughes. “But with life expectancies increasing all the time, and the average retirement now lasting over 20 years, it is unlikely to be achievable for everyone.”

Tags: Intergenerational Retirement Study, Millennials, retire, UK

When the US Supreme Court unanimously ruled on June 5 that church-affiliated pension plans were exempt from The Employee Retirement Income Security Act of 1974 (ERISA) requirements, it seemed to put to bed a debate that had been working its way through the courts for years.

The debate was over whether an ERISA exemption for church pension plans applies only to plans that churches operate themselves for the their own employees, or if it also includes plans operated by administrators that are affiliated with churches, but aren’t churches.

Despite the 8-0 ruling, written comments by Justice Sonia Sotomayor suggest that while the text of ERISA indicates church-affiliated plans are exempt from its rules, the spirit of the law suggests otherwise.

As a result, the ruling “may not, though, bring a conclusive end to the efforts of employees to bring these hospitals within ERISA,” wrote Ronald Mann, a professor of law at Columbia University, in SCOTUSblog, citing Sotomayor’s remarks.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

“I join the Court’s opinion because I am persuaded that it correctly interprets the relevant statutory text,” wrote Justice Sotomayor. “But I am nonetheless troubled by the outcome of these cases.

“Despite their relationship to churches, organizations such as petitioners operate for-profit subsidiaries, employ thousands of employees, earn billions of dollars in revenue, and compete in the secular market with companies that must bear the cost of complying with ERISA,” Sotomayor continued. “These organizations thus bear little resemblance to those Congress considered when enacting the 1980 amendment to the church plan definition.”

When enacted in 1974, ERISA exempted pension plans that were established and maintained by churches for their employees. But in 1980, Congress expanded the exemption to include plans established by churches to cover employees of affiliated hospitals, schools, and other nonprofit organizations.

The Pension Rights Center, a nonprofit consumer organization, said the ruling left a key issue in the case unresolved.

“The Court did not decide whether the plans involved in the cases before it are maintained by the type of organization envisioned by Congress when it enacted the law,” said Karen Ferguson, director of the Pension Rights Center, in a statement. “The Court merely ruled that a religiously-affiliated entity can establish a ‘church plan’ that is exempt from federal pension law.”

Ferguson added “the Court noted that its ruling did not address a second requirement of the law, that an exempt church plan be maintained by an ‘organization’ that has administration of the plan as its principal purpose. That this was not addressed in the Court’s decision leaves hope for workers and retirees covered by these plans that they will receive the pensions they earned.”

Tags: church, church-affiliated plans, ERISA, SCOTUSblog, Sotomayor

UK Workers Expect to Retire Early, But May Not Be Saving Enough

High Court Ruling May Not Settle Church Plan Issue