Pension gap of UK is biggest in Europe

Pension gap of UK is biggest in Europe

23 September 2010 / by Rachael Stiles

The UK has the biggest pension gap in Europe amongst individuals, according to research from Aviva.

The study shows that there is a pension deficit of £318billion in the UK, which is the difference between the amount of income needed to live comfortably in retirement and how much UK adults can expect to have based on current levels.

This is the biggest deficit per person in Europe, the research revealed, and Aviva has calculated that, based on 31 million UK adults retiring between 2011 and 2051, each UK adult will have to put away an average £10,300 a year before they retire in order to close the gap.

The pension gap varies across other parts of Europe, with Germany not far behind the UK with an average per person of £9,700, Ireland is at £7,600, France's comes in at £6,600, and Spain has an average deficit of £5,900.

The situation will be most harmful to older people, who have less time to make up their pension shortfall before they retire, says Aviva; a 50 year old has another 15 years to invest and build up their pension pot, but a person in their 60s has much less time.

Those on lower incomes who do not have much money to set aside will also struggle to build up their pension in time for retirement, and may have to delay retirement.

Toby Strauss, Aviva's UK Life CEO, said that while it is general knowledge that there is a pension gap and that people are leaving it too late to start planning for retirement, the research reveals the extent to which it could impact people once they retire, and the results "are startling".

"We know from our research that many people in the UK are planning to work later into life, but this will not solve the issue fully. However, the problem is not without solution. By investing from an early age, even a small amount can make a big difference in closing the gap. The younger a person is when they start putting money away, the more time they have to build up a sufficient fund to provide the lifestyle they desire in retirement."

Mr Strauss hopes that younger UK adults will see this as a warning of what is to come and act now to ensure they can afford a comfortable retirement.

"Today's research should act as a wake-up call for individuals and governments across Europe, particularly in the UK," he said. "Fortunately it is not too late for people to take action."

© Fair Investment Company Ltd