Do you know how much retirement income your pension savings will generate? If not, you're not alone – research from Wesleyan Assurance Society has found that more than two-thirds of professionals (67%) don't know how much income their pension arrangements will provide in retirement, and that could leave many facing a shortfall in their golden years.
It's a concern that's facing a lot of people it seems, with 61% of those surveyed worried that they wouldn't have enough to live comfortably. However, a lot are overestimating the amount of money they'll need – the average respondent thought they'd need £39,350 a year to live on in retirement, compared to an average pension income of £14,376, and given that Wesleyan's core demographic includes doctors, teachers, dentists and lawyers, ideally many would have built up a decent pension pot.
However, the research does highlight the importance of being prepared, and of taking steps to ensure you'll have enough to live on comfortably. Half of respondents are planning to use property to supplement their retirement income with just 27% planning to rely solely on a pension, but there could still be sacrifices to be made. Just 27% were planning to retire early – down from 34% in 2011 – while 26% expect that they'll instead have to work past their planned retirement age.
And given that 46% review their retirement planning needs less than once a year, there's clear scope for improvement.
"People often have a blind spot when it comes to planning for their retirement income," said Samantha Porter of Wesleyan Group. "The key thing is to have a goal and then work out how to achieve it. Pension planning should be part of a regular financial review as changes such as the fall in pension tax allowances and the initiatives announced in the Budget recently could all have an impact. We would recommend that everyone gets into the habit of reviewing their finances at least once a year."
Preparation is key, and it isn't enough to start looking into it a few years before retirement – by then it'll be too late to make any significant changes, so it's important to save as much as possible from as early as possible whilst always keeping an eye on the performance of your pension.
Setting up alternative income streams could be a great possibility too, whether that's in the form of simple savings accounts (preferably ISAs to maximise your tax breaks) or the likes of property, and with reforms announced in the Budget there's even more scope when it come to spending your pension pot. Again, this makes securing suitable advice key, so make sure to plan in advance and hopefully you won't be one of the 67% that are left uncertain about their retirement income.
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