By Lyndsey Hall
Workers retiring this year can expect a record high pension of almost £20,000 per year, £1,200 higher than those who retired in 2008.
Research by pension provider Prudential reveals those entering retirement in 2018 will have a pre-tax income of £19,900 per year, which is 10% higher than those who left the workforce in 2017, whose average expected annual income was £18,100.
However, experts warn that expectations might not meet reality as more than a quarter of upcoming retirees said they do not have enough money saved for their old age, and almost half feel they are not financially well prepared for retirement or are unsure about their preparations.
Final salary pension schemes are few and far between these days, and only half of employees approaching the end of their working life believe their expected income will enable them to have a comfortable retirement. 27% say they do not have enough money for retirement.
Steve Wilkie of retirement specialist Responsible Life, said, “A lot of people are in for a nasty shock when they discover what they expected their income to be and what they actually have at their disposal are worlds apart.
Too often, people grossly underestimate, or don’t even know, how large a pension pot they will need to even get close to the salary they were earning before they retired. Typically, someone would need to have built up a £100,000 pot to have an income of around £5,000. But millions of people aren’t even close to a pot of that size.
The problem persists that saving into a pension is still not a priority, particularly when the cost of living remains so high and families are struggling to pay the mortgage and household essentials. It’s the classic ‘stick your head in the sand’ syndrome and worry about it another day. That attitude was fine when we had lovely final salary pension scheme, but very few exist anymore, with most being turned into a market-rate annuity or a drawdown facility.
More financial education is needed on being financially prepared for old-age, and it need to be drummed home, again and again, how vital it is to save into a pension as early as possible.”
It was recently revealed that millions of UK pensioners are worryingly reliant on the basic state pension of just £7,000 a year to pay their bills. According to Age UK, for the poorest pensioners, three pound in every four of their income comes from the state pension, rising to almost nine in every ten when other state benefits are included.
The Prudential report, which surveyed some 1,000 people planning to retire in 2018, found that expected retirement incomes have been on the increase each year since 2013, when they hit a low of £15,300.
Have you reviewed your pension pot recently? Will you be able to live comfortably in retirement on your current expected annual income? If you’d like to discuss your plans for retirement and how you could maximise your pension savings, get in touch with us.