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There's a 11% gap between the income people want in retirement and the income they're expecting to get, our latest study reveals, with respondents hoping for 63% of their current income, but expecting 52%. Not only that, but the gap between the age at which people want to retire and the age at which they really think they'll retire is larger among younger people.
"The changing landscape for pension provision is upending the way consumers think about retirement," Rachel Springall, finance expert at moneyfacts.co.uk, stated. "Most of the older respondents in our survey hope to retire by the age of 65, but very few under the age of 45 share this sentiment."
Specifically, statistics show that while 75% of 45-64 year-olds hope to retire between the age of 55 and 65, only 39.3% of under-45-year-olds hope for the same thing, and when they were asked when they realistically think they'll be able to retire, only 18.5% thought it will be possible to retire between 55 and 65. This is compared to 69.4% of 45 to 64-year-olds who expected to do the same, showing a much narrower gap between retirement hopes and realistic expectations for those who are closer to the actual date.
Interestingly, national statistics from the ONS show that only 26% of the adult population in work expect to retire before the age of 65, with the majority (59%) expecting to retire between 65 and 69. This runs counter to the hopes of most survey respondents, regardless of age.
Part of this could be due to moneyfacts.co.uk users' apparent savviness when it comes to their pension pots, with 55.7% knowing how much they have amassed so far. However, Rachel pointed out that "a third of respondents only [had] a rough idea of what they had saved (31.3%), while 5.4% hadn't even started saving for retirement," so even among our informed consumers there's still room for improvement.
The survey showed interesting gaps among those thinking they'll retire later (or not at all) as well. Rachel found that "while only 3.8% of respondents aged between 45 and 64 feel they won't be able to retire until after the age of 70, more than a quarter (25.9%) of those under the age of 45 feel the same way. Even more concerning is the result that 14.8% of those under the age of 45 don't expect to retire at all, compared to only 2.6% of those aged 45 to 64."
These pessimistic under-45-year-olds may also explain why the average expected retirement income for this age group sits at 41%, compared to the average among all respondents of 52%. These people may realise that "While auto-enrolment is a welcome step towards saving for retirement, it shouldn't be assumed that the bare minimum will be sufficient to cover what individuals expect to retire on," as stated by Rachel.
Rather than accepting a lower income in retirement, or relying too much on the State Pension, Rachel said that: "Consumers should make every effort to prioritise their retirement provisions, particularly if they are getting close to retirement age." Until you're retired, it's never too late to add to your savings pot and work towards a (more) comfortable later life.
Aside from contributing more than the minimum to your workplace and/or private pension, those under 40 could benefit from a 25% Government bonus if they invest in a lifetime ISA
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