It’s one thing hoping to retire at 66 years of age, but to do so with enough funds to sustain your golden years is another matter altogether.
Without a sizeable pension pot and ample savings to supplement the full State Pension - currently set at £164.34 per week - many Brits are growing concerned about funding in later life. And it could get worse still. With the UK retirement gap on track to widen to $33 trillion by 2050, it begs the question: how many people are really planning for later life?
Interested to learn more about the nation’s retirement journeys, we surveyed 4,000 people, representing those in their 40s, 50s, 60s and aged 70+.
Here are some of the key takeaways from our Retirement Reality Report.
Planning for retirement
Retirement is the time of life that many people look forward to; there is the freedom to give up work, spend more time with loved ones, and to make headway with the ‘bucket list’.
However, to achieve ‘financial freedom’ one needs to plan accordingly – and this is where many retirees fall short. For instance, while nearly a quarter of people (22%) don’t think it’s important to save for retirement, a large majority (59%) expect they will have enough money to end their working lives before the ‘official’ retirement age of 66.
It seems that the gap between what could happen and what will happen in retirement is something which many people still don’t fully understand.
How prepared should we be?
If you’re still a good few years from retiring, you will likely be wondering what the secret formula is.
The bad news is that there is no one-size-fits-all approach to financial planning for retirement; everybody’s financial circumstances are different, as are their ambitions in life. The good news, however, is that there are ways to tailor your retirement funds to suit your lifestyle – you just need to start saving early.
To put it into perspective, the power of compounding dictates that if you started saving £200 a month today at age 40, and your investment grew by 5 per cent each year, it would provide £126,000 by age 66. However, if you saved twice that from age 50 then you’d only end up with £117,000.
While this is only a snapshot of how savings can affect your long-term financial plan, it is nonetheless useful for understanding how starting to save as early as possible can be beneficial in later life.
Of course, not everybody is leaving their retirement savings until the last minute (especially when holidays, new cars, or much-needed home improvements teeter enticingly on the horizon). In fact, one-third of people think they have a solid “retirement ready” savings plan in place.
However, a large proportion (59%) of these people admit they are unaware of exactly how much money they will be expected to live on when they do finally reach their golden years.
Aspirations vs reality
One of the most concerning key takeaways from our research was surrounding an overreliance on traditional financial provision. For instance, our report suggests an overwhelming majority of people plan to rely on the State Pension (64%) in retirement, while a large proportion (46%) expect that their savings will be sufficient.
However, if these same people are slow taking up a savings plan, have no drive to make sacrifices, or are unaware of the real costs of retirement, the chances of having financial freedom – and enjoying the perks that come with it - is highly unlikely.
Dom Wilkinson, Marketing Director at Equity Release Supermarket, highlights just how unrealistic is to rely on traditional saving strategies in retirement:
“To live comfortably in retirement now, an individual needs to supplement a full state pension with about £12,000 per year. For a 20-year retirement, this amounts to a pension pot of £240,000. The reality is that the average pension pot is little over £30,000. Where do we think we’ll find the missing £210,000?”
For more about our findings, download the Retirement Reality Report, here: