93 percent of savers set to miss their retirement target
According to the latest Aegon UK Readiness Report, a staggering 93% of pension savers are failing to save enough to meet their retirement target. Put another way, not even a tenth are putting away enough money to reach their desired retirement income.
The average desired retirement income in the UK is £35,000 annually - but the reality is roughly a third of that, £12,000, is what will be available.
The Readiness Report, an annual undertaking by Aegon to gauge how ready people are, or will be, to retire, was based on a survey of 4,000 people. The report provides a "readiness score" out of 100, based on such factors as pensions understanding, retirement age, guaranteed retirement income, monthly savings and age, with a score of 70 or above indicating people will meet their expectations in retirement.
The UK's average readiness score was just 52 out of 100. Only 7% of respondents attained the target score of 70. The report also found that 42% of people have never checked the performance of their retirement savings, which is a clear sign of passivity, especially when we also consider that only 4% of respondents received an awareness readiness at or above 70.
Aegon UK's managing director, David Macmillan, said: "It's time for the UK to get real... Showing people how to take small steps that will make a difference is vital. We must empower, rather than frighten".
Part of the solution needs to be better awareness about retirement funds - what will be needed and how to achieve it. The recent Budget changes only emphasise this need, as people will have far greater flexibility with their pension - and we need to consider that with people living longer than ever before, those retirement pots need to last longer too.
A solution also needs to include education on the State Pension - the report found over half of people think the State Pension is higher than it really is, and at a mere £5,881.20 for a single person in 2014/15 it shouldn't be anyone's Plan A.
Properly Prepare for Retirement
Prudential's Class of 2014 report also highlights an urgent need for education and action when it comes to pensions, with it finding that of this year's retirees 20% of women and 7% of men have no pension saving, and will have no other income than the State Pension.
While in the UK we can consider ourselves somewhat fortunate in having a State Pension at all, it must be considered a fallback option rather than a viable alternative to forward planning for retirement - especially for those who want a good standard of living or intend on providing financial assistance to the grandchildren.
Saving for retirement is not as complicated as it can seem, and the latest Budget makes it easier than ever, particularly with the ISA allowance rising to £15,000 a year. It's also important to remember that pension contributions are eligible for tax relief, so, as the Aegon report points out, "£80 is worth £100 for basic rate taxpayers."
As with any form of saving, it's a case of putting aside what you can as often as you can. Beyond that, remember to keep an eye on how your pension is performing so you can react as and when you need to.
Portafina's mission is to simplify the pension process so that everyone can understand it and make their own decisions. It's never too early to start saving, and while the auto-enrolment will help millions of future retirees, it should not cause complacency in saving. If you're in any doubt over how to proceed, seeking impartial advice will help to ensure you're on the right track.
Are you currently saving?
Calculate how much more you could be saving now.
Call 0800 304 7288 for a friendly chat about your pension
The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new
We are really looking forward to reading your comments. Before you start writing, please just remember that everything you write will be displayed publically – including your name. Not sure what sort of thing you can write, and what sort of things you should avoid? Please have a quick read of our social rules for guidance.
INFOPK - LIGHT
Be clear about your pension
Your free pack will explain your pension options, the pros and cons, and how getting financial advice could make all the difference for you; we just need a few details first. (Please see our privacy notice for information on our data practices here.).
Please note: all fields marked with an asterisk (*) are mandatory