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Future retirees heading for a frugal retirement

Future retirees heading for a frugal retirement

Category: Pensions

Updated: 23/09/2010
First Published: 23/09/2010

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 It is now over 6 months old so the content may be out of date.

Our dreams of a comfortable retirement could remain just that after it was revealed that people are not doing enough to prepare financially for their life after work.

Almost half (49%) of those under 50 admit to having inadequate retirement plans, figures from Scottish Widows show.

With figures the Department for Work and Pensions signalling that in 2030 there will be 5.2 million more people aged over 65 compared to 2010, the survey's findings add further woe to the UK's pension problems.

In the complicated world of workplace pensions, the research also found that companies could do more when it comes to educating their employees, with 42% of those in defined contribution schemes saying they had no idea what amount their employer contributed.

Two fifths (40%) of respondents felt that their employer should offer full financial advice if they provide access to a pension, whilst more that half (55%) thought employers should provide at least some kind of general information.

"As the face of UK workplace pension provision continues to change, it is important for employers to engage with their employees to help their understanding of the benefits available to them as the individual has to take responsibility and make the correct decisions about their short, medium and long term financial planning needs," commented Ann Flynn, head of marketing communications, Corporate Pensions, Scottish Widows.

The survey also found that of the 43% of respondents in final salary schemes – a
type of pension plan in which an employer promises a specified monthly benefit rather than depending on investment returns – 33% were relying on this as their main source of retirement income.

This highlights the fact that knowing what's what when it comes to your pension is vital.

"Despite the death of the final salary pension due to its lack of affordability or sustainability, it is clear that many people are still incredibly reliant on their employers and still believe that their defined benefit scheme will provide them with enough money to support them throughout their retirement," said Ms Flynn.

"This is a worrying thought, and we would therefore encourage everyone to investigate if their existing savings are adequately covering their needs."

With a recent report by Aviva on the UK pensions gap showing that UK adults should be putting away on average £10,300 more every year in order to attain a comfortable retirement, planning for that future time has never been as important as it is right now.

If you're one of the savvy ones that built up a decent pension pot, you may wish to soon consider purchasing an annuity.

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