New research from Standard Life, part of Phoenix Group, reveals that UK adults face a significant shortfall in the amount of pension savings they have at retirement compared to what they wanted to retire on, potentially impacting their retirement lifestyle as a result.
Standard Life’s Retirement Voice Report found that, on average, retirees had hoped to build up a pension pot of £250,000. However, the average amount that they accumulated by retirement was £131,000 – leaving a £119,000 shortfall.
Based on current annuity rates, a pot of £250,000 could lead to an income of £1,007 monthly, or £12,091 a year, assuming a retirement age of 66. A pot of £131,000 could result in a monthly income of £527 in retirement, or £6,332 yearly - £480 month, or £5,759 a year less. However, the not insignificant £250,000 pot falls short of a ‘moderate’ standard of living in retirement according to the PLSA, including the State Pension.
Retiree regrets
Retirees also expressed several regrets in relation to their financial preparation for retirement. Half (50%) wished that they’d thought about their retirement finances at a younger age when they had more time to make changes, 54% wished they saved more, and 53% wished they started saving earlier. Other regrets include:
• 51% wished they had more information about how to plan and prepare for my retirement
• 42% said they should have sought advice or guidance to plan for their retirement
• 37% said they should have sought advice or guidance before they accessed their pension savings
Dean Butler, Managing Director for Retail Direct at Standard Life said: “It can be hard to work out how much you need to save to achieve your desired standard of living in retirement, particularly earlier on in your career. It’s even harder to stick to it, as everyday expenses and those one-off costs that come up in life constantly threaten to move long-term saving down the priority list. Clearly there’s a big gap between what people hope to save, and what they actually do – this is unsurprising, particularly when looking at it during a cost-of-living crisis, however the result can be a significantly reduced standard of living in retirement.
“Access to affordable personalised advice and guidance is crucial to closing the gap – as things stand, way too few people feel able to get advice and we can see that people then regret not doing so. Ultimately, contributing as much as possible, as early as possible is the key to a good retirement outcome, but it’s a huge challenge to know what to aim for and when to prioritise long-term saving over more immediate priorities.”
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