Retirees in 2015 have some of the highest retirement expectations of any group since the financial crisis, but it seems that the next generation have far weaker hopes. Indeed, those aged 45-55 estimate that their annual retirement income will only be £14,000, £3,000 less than the income expected by this year's retirees (£17,000).
Research by Prudential has revealed that 70% of 45-55 year-olds questioned believe that their standard of living in retirement will be worse than that of their predecessors, with just 27% saying that their pension will provide them with a comfortable retirement. This is a sharp contrast to the attitudes of those retiring this year, of whom 50% believe that they have enough savings to give them a good standard of life during their work-free years.
Compounding this uncertainty is the fact that almost half (49%) of respondents said that they have put their pension contributions on hold at some point, with 20% taking a break of between three and 10 years and 11% stopping payments for over a decade.
"We know from the results of our annual research that retirement income expectations have been rising over the past few years," commented Vince Smith-Hughes of Prudential, "so it's surprising to see reduced confidence among the next generation of retirees. However, it's not too late for those in their 40s and 50s who are looking to top up their pension pots – for many people this is the time in life when earnings are at their highest, thus providing the best opportunities to save."
If you are worried about the size of your pension savings and are feeling pessimistic about the kind of income you can expect when you give up work, it's time to do something about it.
According to Prudential's calculations, a 45-year-old planning to retire at 65 would only need to pay around £70 a month into a private pension to bridge the £3,000 shortfall between their retirement earnings and those of people retiring this year. It's also a good idea to review the size of your contributions to your workplace pension, and if you haven't yet auto-enrolled, make sure you sign up! Remember that your employer will make contributions alongside your own, which could boost your pot considerably.
Consulting a financial adviser can be useful, too. They can create an action plan that will help you to achieve the retirement income you want. They will also help you to maximise your assets and investments so that your hard-earned money works as hard as you do! You may also want to consult Pension Wise for some free preliminary guidance and check out our annuity planner to see what kind of income you could get.
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.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.