SCOTLAND is facing a more dramatic pensions crisis than anywhere else in the UK as it emerged that fewer than one in ten people is investing enough for their retirement
New figures show suggest the average Scot will be more than £20,000 worse off than they expect in retirement.
Although retirement savings rates among workers north of the Border has improved marginally compared to a year ago, Scots are still facing a massive pensions black hole with the lowest average "readiness" score of all the UK regions.
On average, Scots currently in employment hope to retire on an annual income of £33,600, but in reality face an actual projected income of just £12,300 a year.
Only eight per cent of the Scottish population are financially on track to achieve their desired pension pot.
It comes amid Government efforts to encourage the younger generation to save for retirement, including the planned rollout of a new Lifetime ISA for under-40s in 2017.
However, Steven Cameron, Pensions Director at Aegon UK, which commissioned the research, insisted there are optimistic signs.
He pointed to both a slight increase in the number of Scots saving adequately for retirement and the shift towards more realistic expectations compared to 2015, when the average Scottish worker said they expected to retire on an annual income of around £40,000 - more than £30,000 out of kilter with their actual pension projections.
Mr Cameron said: “Despite their reputation for prudence, Scots are lagging behind the UK generally with eight per cent on track for the retirement they want, compared to 12 per cent across the UK. But on a positive note, across Scotland, since last year, over 150,000 people have improved their saving behaviour, or changed their aspirations for retirement.
“But the job is far from done: 92 per cent of the Scottish population are still falling short of their retirement targets."
Based on the most competitive annuity rates currently on the market, a 65-year-old in good health would need a lump sum of around £800,600 to balance out inflation and achieve an annual retirement income of £33,600 a year.
However, previous research has indicated that the average 30-40-year-old in the UK has retirement savings of just £14,000.
The findings are the latest to paint a bleak picture of the retirement prospects for young people.
In March, a report by pensions experts, Royal London, estimated that a 22-year-old today making minimum workplace pension contributions - currently set at two per cent, but set to rise to eight per cent in future - would need to work until 77 to be able to enjoy the sort of "gold standard" pensions enjoyed by many of their parents' generation.
A report by think tank, the Centre for Policy Studies, also urged those in their 20s and 30s to plan for a retirement without a state pension as the ageing population makes it increasingly unaffordable.
Jim Doran, a senior consultant for Mercer in Glasgow, said: "The pensions savings gap – the difference between what is being saved and what needs to be saved for an adequate income in retirement- is one of the biggest challenges facing policy makers in Europe.
"Employers in Scotland are waking up to the risks of employees not being able to afford to retire, which include an ageing workforce and resulting lack of promotion opportunities for younger workers."
Mr Doran added that so-called "auto-escalation" arrangements - where employees pre-commit to regular increases in their pensions contributions, perhaps in line with pay rises - had been shown to boost retirement savings.
He said: "Over time, the individual forgets that they have committed to save more and is in effect defaulted into far higher savings rates in future years.
"One experience of this type of arrangement in the US showed that it helped boost the average pension member’s savings rate from 3.5 per cent to 13.6 per cent in just over three years."
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