May 15th, 2019

Future pensioners relying on state pension could face a £68k shortfall

Research conducted by Nationwide Building Society has shown that pensioners risk an astounding £68,000 shortfall in retirement by underestimating the cost of retirement and expecting to rely solely on their state pension.

The research highlighted that a third of middle-aged Brits expect to exist solely on the state pension in retirement, despite the fact they could be financially short every month. A poll found that current pensioners need an average of £885 each month, which is £380 more than the £505 received from the state pension.  This news could force new retirees to abandon plans for travelling, moving home or supporting their children and grandchildren.

The Nationwide study, which questioned 1,000 people aged 40 to 60 years old, found that they expect a monthly shortfall of £208 a month, amounting to £37,440 after calculating current retirement age and life expectancy. However, the shortfall could be twice as high for those without additional pension provision.

Nationwide found that just 40% of middle-aged Brits have a private pension provision in place, with a further 43% believing they will not be able to afford the retirement lifestyle they want.  52% of people aged 40 to 60 are worried about affording retirement and 43% do not believe they will be able to afford the lifestyle they want when they retire.

Nationwide’s Director of Home Propositions, Jason Hurwood, stated: “We are living longer and need more money to keep us going. The reality is that without adequate income, and potentially living a third of our lives in retirement, older people risk missing out at a time in life when they want to relax and enjoy themselves.”

Gregg McClymont, The Peoples Pension Director of policy, said that it is a “stark reminder” that more needs to be done to increase automatic enrolment pension contributions.

“For many people, we know that even when contributions increase to 8 per cent this year, it won’t be enough.

While we can’t escape the fact that household budgets are stretched, once we know the impact of this year’s increase the government must look closely at what the right level needs to be in the future to ensure that today’s workers won’t face pensioner poverty.”

Nationwide’s survey also showed that 49% of those questioned stated that they are struggling to save because of limited disposable income and a further 16% said that debt is preventing them from saving. Additionally, only 9% have set retirement targets and a further 54% do not have a clue how much is in their pension pot, indicating just how unprepared those heading towards retirement are.

In conclusion, this research highlights the importance of everyone obtaining Independent Financial Advice and saving for retirement in order to not only live comfortably in retirement but to be able to afford the lifestyle they hope for.

To speak with one of our advisers click here to arrange a call back.

Written by Kay Crooke – Associate Practice Director at Prosser Knowles Associates Limited.

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