Most people in their 50’s may not have enough savings in their pension pot to fund a comfortable retirement, according to recent research by Sunlife.
Worryingly, while the average pension pot for 79% of those surveyed was £146,666, the remaining 21% of those in their fifties did not have any private pension provision at all.
According to a report from The Pensions and Lifetime Savings Association to enjoy a moderately comfortable retirement – that covers basic expenditure and a few luxuries such as a European holiday – the average retiree would need an income of £20,200 a year. Those aspiring to a more affluent retirement – such as more than one foreign holiday and some home improvements – will need nearer £33,000 a year.
In comparison the Office of National Statistics reports that the average salary for full-time workers in the UK is currently around £29,009.
While the current state pension is £8,767 per year for individuals those hoping to achieve the remaining £11,433 required for a £20,200 a year annuity (assuming growth of 3% a year) will need a total pension pot of some £282,000. To rectify the shortfall someone who is 50 now will need to save £357 a month into their pension to reach the target pot by 65.
Those aiming for the affluence of a £33,000 a year retirement have a much steeper mountain to climb. According to SunLife a 50-year old would need to save £1,669 a month, while the costs rise to £2,492 for those aged 55 and a huge £4,125 a month for 59 year olds.
Simon Stanney, equity release, marketing director at SunLife said: “According to our research, just 9% of people in their 50s are confident they have enough in savings, investments and pensions to fund their retirement.
“Obviously the average over 50s’ pension pot is not yet mature…but for others, especially those nearing retirement age, the amount they need to save each month is quite substantial if they are to build up a big enough pot to retire ‘comfortably’.”
There are other avenues open to those who are retired or seriously thinking about their options. On average those in their 50s have seen their homes increase in value by over £133,000 and this opens the possibility of using equity release to supplement an insufficient pension pot.
Those who face paying a mortgage well into retirement might want to investigate the possibility of a Retirement Interest Only (RIO) mortgage – these allow homeowners to remortgage their property, releasing equity, but with the benefit of only paying the interest due. For those planning for retirement we have a range of retirement guides, including advice about making the most of Lifetime ISAs (LISAs) and retirement planning risks to avoid.
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.
