The figures show that:
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6 in 10 (60 per cent) expect to require an annual income of 50 to 100 per cent, or above, of their current income. Yet the current pension replacement rate in the UK is just 29 per cent.
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Low earners (earning £10,000-£15,000) can’t envisage living on much less than they do now, so more of them are targeting 100 per cent of their current income levels than people in other income brackets
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Two thirds of people are not confident that their income in retirement will cover their needs
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17 per cent don’t know how much they’ll need
‘There isn’t a simple answer to how much is ‘enough’ in retirement. We often do this by working out a percentage of each individual’s final earnings. We call this a replacement rate. But our recent work suggests that this can be too much of a blunt instrument. What an individual needs in later life will depend on things like income levels during working life, whether housing costs have to be taken into account, whether there’s potential income from a partner and aspirations for later life. It’s worrying that many consumers seem to have unrealistic expectations about their retirement income. Many are simply not saving enough to match their expectations.’ said Helen Dean, CEO of NEST.
‘Auto enrolment gives people a big helping hand – not only to get into the savings habit but also by boosting their pots with employer contributions and tax relief. However, we need to start thinking about how to help people think about the next steps once they’re in - what are their aspirations and likely needs in retirement and how can saving in a pension help them get there?’ she said.
How much is enough? is one of the key questions to be tackled at the NEST Insight conference this week. The event marks the launch of the new NEST Insight unit, which will work in partnership with other organisations and academics to tackle the big challenges facing the DC generation of savers.
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