Running out of money in retirement is a growing concern for many, and the key to ensuring that the fear isn't realised is to save as much as possible during your working life. Happily, the message appears to be getting through, with new research from Aegon UK showing that a growing number of people are now on track for the retirement they aspire to.
The figures show that 12% of respondents are now on track, a notable increase from the 7% who said the same in April last year, arguably as the pension freedoms and auto-enrolment have boosted engagement and encouraged more people to save.
However, Aegon also points out that one of the key drivers behind the change has been that people have become more realistic about the level of retirement income they're likely to receive: average annual income expectations have fallen from £42,000 in April 2015 to £38,000 today, which although still high, is a definite improvement.
Indeed, this, coupled with the 15% of respondents who are saving more into their retirement pot as a direct result of the pension freedoms, means the gap between the income people would like and the income they're realistically set to receive has narrowed by £6,600 in the last year – the average actual projected income currently stands at £14,000, which in itself is an increase on the £11,400 figure of last year, and although there's still a gap of £24,000 to address, any improvement is welcome.
The results suggest that people are beginning to think a bit more seriously – and realistically – about their likely income in later life, and are actively working to improve their prospects by saving more into a workplace pension.
Indeed, people are also engaging more with their pension savings, with 24% of respondents having checked the performance of their retirement savings within the last six months, while 22% have taken steps to review their plans for retirement. This is up from 19% and 18% respectively in April 2015, which clearly suggests that Government initiatives have helped to improve overall engagement.
Steven Cameron, pensions director at Aegon UK, said that we're seeing a "seismic shift in attitudes" towards saving for later life, with the figures suggesting that 2m people have improved their saving behaviour or changed their aspirations for retirement in the last year.
"As we enter an era of personal responsibility for retirement saving, it's clear that the pensions penny is finally beginning to drop for the UK's retirement savers," added Steve. "The range of radical Government pension changes has certainly grabbed public attention, and it's heartening to see people being motivated to engage with their future and meet the challenge of funding and planning for their retirement."
However, despite the improvement, the "job is far from done", he said, with the figures meaning that 88% of the population are still falling short of their retirement targets. He urges the industry and Government to "band together" to ensure that initiatives such as the Lifetime ISA and secondary annuity market work effectively, but of course, a lot of it comes down to your own action – and you need to act fast!
They key to a comfortable retirement, aside from having realistic expectations as to likely income, is to save as much as possible from as early as you can. Make sure you're enrolled in your workplace pension scheme, and if you can, have other long-term savings vehicles (such as an ISA) as well to offer additional financial security. This way, you needn't have to be quite as concerned about running out of money in retirement, and you may even find that your expectations come closer to reality.
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