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Are you doing enough to prepare for retirement?

Are you doing enough to prepare for retirement?

Category: Retirement

Updated: 01/10/2014
First Published: 01/10/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Putting precious money aside for a pension pot can seem like a chore, especially when there are probably many other things that call for your cash right here, right now. But building up that nest egg for your retirement is crucial if you want to sit back and enjoy your golden years in comfort.

However, it seems as though there are still many of us who aren't doing enough planning for retirement, which could mean that retirees end up with a much smaller pension pot than expected.

The knowledge gap

According to research conducted by Scottish Widows, around one in four people have no concrete idea of how much money they are contributing to their workplace pension. This suggests that many people are still happy to stay in the dark with regards to their pension pot, which means they may have an unwelcome shock when the time finally comes to look at how much they have saved.

Scottish Widows' research also found that many people were vastly underestimating how much money they would need to have a quality standard of living during retirement. The survey found that the majority of respondents (56%) believed that the minimum contribution of 8% would be enough to guarantee their standard of living, but recommendations are actually far higher at 12%.

Clearly there is a considerable knowledge gap among workers about their pension savings which needs to be addressed, as Lynn Graves of Scottish Widows was keen to point out: "While we have clearly come on in leaps and bounds in getting people to think about their retirement, it is important that employees are made aware of the need to be saving above the minimum amount if they want to truly safeguard their finances for later life."

The gender gap

Along with the knowledge gap, it also appears that there is a notable gender gap among employees. Research from the Association of Investment Companies (AIC) found that male workers were not only more enthusiastic about changes to pension savings, but that they were also more likely to make voluntary payments into a pension scheme.

In their survey, 54% of men declared that they were making voluntary pension contributions. This dwarfs the number of women who claimed the same, which stood at just 46%. When asked about their feelings towards the new pension freedoms in April 2015, 44% of respondents said that the changes made them feel more positive towards pension schemes, however, men were again more receptive to the ideas than women: 47% of this group were men.

The figures also revealed that the pension changes were more likely to tempt men to start saving more for their pension than women: out of the 26% of respondents who said that they would increase their contributions post-April 2015, 28% were men compared with only 20% of women.

Commenting on the results, Ian Sayers, director general of AIC, said: "It's well known that many of us are not contributing enough to our pensions. So it is hugely encouraging to see that with new pension freedoms only months away, consumers are already much more enthusiastic about pensions." However, he added that the gap between men and women showed that women were being "more cautious" about the approaching pension changes then men.

Closing the gaps

So, what can you do to ensure that you are well-provided for during your retirement? The first thing to start doing, if you haven't already, is to join your company's pension scheme. This will start your retirement nest egg on the right footing. If you can, try to put away more than the minimum amount. This will ensure you have enough funds to give you a good living standard during your retirement.

Another good idea is to get as informed as possible. If you're unsure about the new pension freedoms, find out as much as you can! For starters, read our retirement guides to find out about your options, and then get some expert advice. Independent financial advisers are the best people to go to, but your employer, pension scheme provider or bank and building society are other information hotspots. You can also check out our annuity planner to find out if this is an option for you.

Most importantly, don't be afraid to start planning early – this way you will be fully prepared for the end of your working days.

What next?

Read our retirement guides

Check out our annuity planner

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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