Third of adults not saving into a pension

The latest wealth and assets survey by the Office for National Statistics has revealed what people think about the various strategies for saving for employment. 

32% of the respondents who expected workplace or private pensions to provide retirement income were not currently saving into one. 46% of this number gave the main reason for not contributing as low income, not being in work or being in education. 

46% said that buying property would be the best use of their money.

The research also shows: 

  • 40% thought employer pensions schemes were the safest way to save for retirement 
  • 51% are confident that their retirement income would be enough to provide the standard of living they want. 

Sally Merritt, head of product for Saga Investment Services, said: 

“Our own research shows that the majority of people do not understand how much they need in their pension pot to live even a basic life in retirement, typically underestimating by half how much income a pension pot of £244,000 would give them.”

Underestimating retirement income 

Research by Saga Investment Services highlights the difficulty that people have with accurately judging the level of savings they will need to have the kind of retirement they would like. 

A survey of more than 1,600 people aged over 40 found that the respondents consistently underestimated the pension pots they would need. 

To get an annual income of £10,400, respondents estimated that a pot of £126,000 would be enough when, in fact, this would only generate £6,904 of annual income. Similarly, respondents thought a £500,000 pot would give £64,000 in income when it would actually generate £27,000.

Sally Merritt said: 

“This could well be because people underestimate how long they are going to live in retirement, or that they simply don’t understand what sort of income a typical pension pot can generate.”

Starting retirement planning

It is always advisable to seek professional advice if you are unsure about any aspect of retirement planning. Everyone, however, should try to evaluate what position they are likely to be in when they get to retirement if they continue their current saving habits. 

If this position is not desirable, what changes need to be made? 

Your position 

To begin to get a picture of what kind of income you will have in retirement, you will need the following information: 

  • your state pension age 
  • your state pension income
  • the age you are currently aiming to retire 
  • workplace or private pensions (including those from previous jobs) 
  • savings or investments
  • any inheritance you are likely to receive 
  • other sources of income 
  • equity tied up in property. 

Your retirement goals 

Your aim for retirement may be to live a comfortable life and have your needs taken care of. But have you factored in the fact that your retirement may be 20 years or longer or the cost of care?

You may also have other goals, such as setting up a small business or travelling. 

If you do not think you are going to be in the position you want, you have a number of options: 

  • pay more into your pension – this will involve having less money in the short and medium term to increase your retirement income 
  • deferring your retirement date – by delaying the date at which you begin to draw income from your state and private pensions, you could increase the size of the pot.

Get in touch with us today to talk about your retirement planning in detail.