Public First and Legal & General has published Building Futures Across a Lifetime a new report on pensions adequacy that launches L&G’s Decades Ahead programme.

The report presents the findings of six months of Public First research, which included new analysis of official government surveys; a poll of 8,000 people aged 18 to 69; and conversations with people in their 40s and 50s in three parliamentary constituencies.

1. Who isn’t saving?

We found that 35% of people in work aren’t saving into a pension. Some of the groups with the lowest levels of saving are familiar to pension policy experts – the self-employed are top of the list. But the largest number of non-savers work for SMEs. We need to think about how to drive up pension saving in small workplaces.

Low saving rates are also driven by non-work characteristics. People in work are less likely to be saving into a pension if they are single, disabled, living in London, non-graduates or renters.

2. Who’s unlikely to have an adequate retirement income?

For this research we created a way of measuring whether people are on track for an adequate income in retirement. We call it MRR – which stands for Minimum, Replacement, Rent. A retirement income will be adequate if it:

• Secures the MINIMUM that a single pensioner needs to live a decent life; and
• REPLACES a specified percentage of an individual’s pre-retirement earnings; and
• Also covers the costs of RENT for people who rent their home in retirement

Our modelling found that around HALF of people aged 25 to 54 who don’t have a DB pension are on course to achieve this adequacy measure.

Among those who will own their home in retirement, most people with low lifetime earnings are on track (the combination of the state pension and current auto-enrolment rules gives them enough). Only the non-savers mentioned above are in trouble. By contrast, many people with middle to high lifetime earnings are not on course to achieve their personalised replacement rate.

Among people who will rent in retirement, people of all income backgrounds are off track. However, most people who will rent in retirement come from lower income backgrounds.

3. Who is off-course in mid-life?

We looked in detail at the cohort aged 40 to 54 and found low pension saving and engagement. For people around the age of 50 who are in work and don’t have a DB pension, the median level of pension saving is just £27,000. Part-timers have £6,000 and renters in work £3,000.

Not surprisingly, people aged 40 to 54 are more pessimistic about their savings than either younger or older age groups. They also have low engagement. Adults aged 40 to 54 are LESS likely to be engaged with their pension than 18-34s.

We should not be fatalistic however. It is never too late to save. A 47-year old has 20 years to make pension contributions before the state pension age. Even with current AE rules, they can build up a significant sum. And employers can help by nudging and advising them to save more.

You can read the full report here or visit the Decades Ahead webpage here.