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22 Jul 2015

UK workers are £9,000 short on retirement income

New research has highlighted a concern that UK savers heading towards their retirement could find themselves almost £9,000 short of the income they need to live a comfortable later life, Money Facts reports.

According to Aviva´s latest Real Retirement Report, the average UK worker aged 45 and over may only be able to fund less than a third (29%) of their desired retirement income.

This is because most people over the age of 45 expect an annual income of £12,590 from their pension savings and investments; but the report found that the average pension pot would amount to £53,703, resulting in an annual income of just £3,117 with a typical annuity, or £3,635 per year with a 25-year income drawdown agreement.

While the state pension could fill some of this shortfall, savers are being warned not to rely too heavily on this income source. Even with an average state pension of £6,656 per year, most retirees would still have a shortfall of £2,299.

A worryingly large proportion of workers were unaware of the issues facing their retirement income; more than a third (34%) of those aged 55-64 admitted they hadn´t even thought about how much annual income they would need to fund their retirement, and 29% of over-45s said they had neglected the subject, too.

Despite this, however, 43% of workers over the age of 45 felt “financially fit” to retire, but only 34% of 55-64 year olds could say the same.

The report also found that less than half (43%) of respondents were paying into a workplace pension scheme, and just 30% had either a personal pension or SIPP (Self-Invested Personal Pension).

Clive Bolton, managing director of retirement solutions for Aviva, noted that while the new pension freedoms have given people more options when it comes to saving, they should still take responsibility for their saving and planning behaviours.

“These findings should encourage every person still in work to think hard about their retirement finances,” he said. “As things stand, the vast majority of people are in danger of being left short-changed by insufficient savings pots.”

Copyright M2 Bespoke 2015

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