Pensions shortfall in Britain: savings culture must be revitalised
An article in City AM , one of the leading newspapers in London and the home counties, reports on research that shows the majority of individuals in the UK will face a shortfall in their pension pots.
It says this amounting to thousands of pounds each year, as they are severely underestimating how much they will require to live a comfortable lifestyle in retirement.
The findings by Aviva show that on average, individuals anticipate an annual income of £12,590 on retirement, but just 29 per cent of this will be covered by savings and investment. Even people who claim to be ‘retirement ready’ will face a shortage, with investments covering just over half of their future pension income.
Managing director of Aviva retirement solutions, Clive Bolton says of the shortfall: “It is very easy for people to underestimate how long retirement pots need to last, and it takes a careful balancing act to plan for the future as well as enjoying the here-and-now.”
This article echoes the findings of a recent deVere Group poll regarding baby boomers approaching retirement.
A sample of clients in the UK and U.S., aged between 50 and 65 were asked “what is your number one financial worry?”
52 per cent claimed the primary concern nearing retirement is not being able to maintain their current lifestyle throughout their golden years.
19 per cent of those asked cited not being able to stop work when they wish; 15 per cent of clients said not being in a position to support close relatives financially, and the remaining 14 per cent named health and care costs as their main concerns in retirement.
The results of the deVere survey show that even though these so-called baby boomers are one of the wealthiest generations, they still have major financial worries with regards to their financial status in old age, and fear they simply haven’t saved enough during their working lives.
I am often quoted in the press about the importance of a fundamental change in attitude towards saving, in order to circumvent potentially devastating consequences in retirement.
When you consider increasing life expectancy – meaning savings need to last longer – the cost of living on the rise, company pension scheme deficits, low interest rates and rising care costs, not to mention the government not being in a position to support pensioners in the future, it is vital that the savings culture takes a dramatic turn.
Although the ‘live for the moment’ attitude is not without its perks, ‘tomorrow’ will eventually present itself, therefore people must prepare for their retirement as early in their working lives as possible, to maintain or exceed their lifestyle ambitions as they get older.
The time to act is now, as the longer individuals delay their retirement plans, the more difficult it will be.