How much income will you need to live on in retirement -- and are you on course to reach that goal?
For many people in the UK there is a considerable gap between expectation and reality, according to a new report published by the Equity Release Council and retirement specialist Key.
Older homeowners anticipate that they will need an annual retirement income of £35,196. That's more than double today's average of £17,212, leaving a potential shortfall of £17,984 a year.
And the pressure on retirement finances is likely to grow as one in six (16%) people plan to draw on their pension savings early and fewer retirees benefit from generous final salary pensions.
Homeowners aged 55+ who say they are unable to increase their pension savings cite the challenges of rising living costs (30%), prioritising mortgage repayments over pension savings (24%), supporting financial dependants (22%) and earning less money so being unable to afford to save more (24%). Others believe they are saving enough already or say they are not planning to retire soon so have time left to save.
Property wealth is one way of closing the retirement income gap and holds "significant untapped potential" according to the authors of the report. The average homeowner in England and Wales could access £88,290 from their property through a typical equity release plan -- equivalent to over a decade of state pension payments.
Yet there is often a "blind spot" when it comes to bricks and mortar, with the report revealing that just one in five (19%) older homeowners who have sought information, guidance or advice on later life finances were prompted to consider accessing property wealth as an option.
Commenting on the findings, David Burrowes, chairman of the Equity Release Council, said: "With the UK's population ageing rapidly, the scale of this issue is only set to become greater. An increasing number of consumers must make their pensions savings last over longer retirements with property wealth fast emerging as a viable solution to help meet this funding challenge.
"Our report emphasises the pension pressures faced by many across the UK and calls for property wealth to be better considered and integrated into the advice process. A single-product solution to retirement planning is no longer fit for purpose. We must break down the silos that create tunnel vision when it comes to later life financial planning."
Key chief executive Will Hale added: "Today's report shines an interesting spotlight on an issue that the vast majority of us will face at some point in our lives. How do we juggle our financial responsibilities as we age in such a way that allows us to increase our pension contributions and achieve goals such as paying off our mortgages? Sadly, there is no simple answer to this particular question -- especially with the slow death of final salary schemes but an increase in longevity.
"However, to me this report suggests that we should be asking an entirely different question -- how can we use all our assets to help us achieve our wants and needs in later life? While even the boost provided by using residential property, investment and savings as well as pensions might not help everyone achieve a retirement income of over £35,000 -- which is higher than the average UK salary -- it will certainly help.
"Indeed, taking a holistic approach to retirement planning and ensuring access to good specialist advice will mean that more people are able to enjoy a comfortable retirement."