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22 Oct 2014

Britons Headed Towards ‘Impoverished Retirement´, Study Shows

New research shows that at the current rate of saving, millions of UK pension pots will only be able to support retirement income for five years, Economic Voice reports.

According to the year-long ‘Savings Gap´ study conducted by True Potential, the average Briton reported that they would need an annual income of £23,457 in order to enjoy a comfortable retirement.

This would require a pension pot of £469,140; but based on current saving levels, savers will only manage to achieve a £120,213 pot, which would fund their desired annual income for only five years. Over a longer period of time, this would pay out just £6,011 per year throughout a person´s retirement – a figure that only 4% of respondents said they could live comfortably on.

Researchers analysed the debt and savings habits of over 8,000 UK workers, as well as their preparations for retirement, in order to identify what standard of retirement savers would enjoy and how far away they were from their ideal retirement income.

The results indicate that a clear choice is emerging – to either drastically change saving habits or to work until an older age and accept a ‘minimum wage´ retirement.

Experts suggest that this Savings Gap is partly due to the effects of the financial crisis, low interest rates, and easy access to high cost credit. Other factors include poor financial education and complex regulations.

Although saving amounts have steadily increased over the last 12 months, they are still far from what´s needed to enjoy a comfortable retirement. And women savers are especially falling behind, putting away just £2,046.40 per year compared to men´s £3,321.17 a year.

True Potential managing partner David Harrison, commented:

“Britain is sleepwalking towards an impoverished retirement and the reality for many […] is that they will simply be unable ever to retire.”

“The answer is not to lower our aspirations for retirement but to raise our savings game now as a country […] By changing the way we interact with our finances, we can begin to swing the pendulum back towards savings and that is our best hope to close the Savings Gap.”

Copyright © M2 Bespoke 2014

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