Pension Savings Fall Short by £119000: A new study shows retirees’ pension pots are smaller than expected.
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Retirement Voice from Standard Life shows a worrying trend: retirees are averaging just £131,000 in their pension pots – a deficit of £119,000 compared to those who expected a quarter-million.
Pension Savings Fall Short by £119000
In today’s annuity market, if you have a pension pot of £250,000, your monthly income would stand at £1,007, or £12,091 if you retire at age 66.
Now, retirees with pension pots of £131,000 will have to live on just £527 a month. This amounts to £5,759 a year.
The retirement many retirees aspire to is far from comfortable.
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Pensions and Lifetime Savings Association (PLSA) estimates that retirees need £31,300 a year to maintain a “moderate standard of living” with a nest egg of £131,000.
These numbers aren’t the only thing to worry about for those going into retirement. Because of the rising cost of living, few retirees are able to take advantage of the increased pension contribution allowance in the new tax year. Some people even choose to ‘unretire’ in order to boost their pension savings.
According to the report, at least 50% of retirees regret not planning their retirement finances earlier, saving more diligently, or starting saving earlier in life.
Standard Life’s managing director for retail direct, Dean Butler, said: “It can be hard to work out how much you need to save to achieve your desired standard of living in retirement, particularly earlier on in your career. It’s even harder to stick to it, as everyday expenses and those one-off costs that come up in life constantly threaten to move long-term saving down the priority list.”
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According to Butler, the substantial gap between what people plan and what they actually save is “unsurprising”, especially during a cost-of-living crisis. However, it results in a “significantly reduced standard of living in retirement”.
If your employer matches your contributions up to a certain amount, make sure you take advantage of that. Adding 2% to your pension contributions could boost your retirement pot by £108,000, according to Standard Life.
Consider putting your bonus into your pension instead of spending it. You will benefit from tax relief and National Insurance savings, as well as possibly boosting your child benefit.
If you earn more than £260,000 a year, you won’t be able to use the full allowance for pension savings.
When you get a raise or have some extra cash, boost your pension with the new tax year.
Put money away earlier in the fiscal year to put yourself in the best financial position for the future, Butler says.
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