Two Thirds Of Retirees Risk Running Out Of Money | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 05/05/2021

Two-thirds (66%) of workers retiring this year are at risk of running out of money if they rely on just their personal and state pension, a new report has revealed.

The report from Standard Life Aberdeen found that 2021 retirees are planning to spend an average of £21,000 a year during their retirement, which if they just lived on their personal pension savings, along with the money they would receive from their state pension, would result in two-thirds being at risk of running out of money.

As well as this, the report found that the average value of pension pots for those retiring this year is £366,000, but a third (33%) have less than £100,000 saved. Commenting on the findings, John Tait, retirement advice specialist at Standard Life Aberdeen, said: “Pension pots are without a doubt the most popular option for funding retirement, but it’s so important that retirees consider any other savings or assets they can use when deciding whether they can afford to retire or not.”

To help plan for retirement, it is usually advisable to speak to an independent, qualified, financial adviser who will be able to help you look at how to make your retirement income last throughout your retirement. Alternatively, you can book a free consultation with our preferred independent financial advisor, Kellands.  

How to boost your retirement income

For those set to retire or who have already retired, there are some options available that will enable them to boost their retirement income.

One of the most common ways retirees are able to increase their retirement income is by using the money they have built up in their homes by downsizing and moving to a smaller, cheaper home. This will often not only enable retirees to get a lump sum of money, but the running costs of the new home will likely be lower than their previous home.

Alternatively, for those who do not want to move home, equity release could be an option. Equity release allows homeowners to release money they have built up in their homes through a loan. The loan usually only needs to be repaid when the borrower dies or moves into a permanent care home. Over the last few years, the choice of products within the equity release market has rocketed, resulting in borrowers being able to choose from more deals offering greater flexibility, such as the ability to make interest or partial repayments on the loan. At the same time, equity release rates have fallen. Saying this, equity release still has a long-term impact on finances, so anyone considering this option should speak to an independent financial adviser first. For more information read our guide on equity release

Another common option for retirees to boost their income is to continue working part-time when they have retired. Continuing to work helps to provide an additional, regular income, and can be a good choice for retirees who are not ready to take the step from full-time work to complete retirement.

How to boost retirement income before you retire

Ideally, those who think they will need more than their pension income to support themselves during retirement will have plans in place on how to boost their retirement income before they retire.

For example, those who have the financial ability to save more into their pension pots in the years leading up to their retirement may want to consider increasing their pension contributions. Alternatively, some may plan to work for longer, which will enable them to save more into their pension pots, as well as allowing them to defer taking their pension.

Another way retirement savers can plan to boost their retirement income is through investing any lump sum windfalls they receive, for example through work bonuses or inheritance. Although any type of investment comes with a risk of not making any returns, or even the possibility of losing all the initial money invested, it can be a good way of growing investments in the years leading up to retirement and providing an additional source of income during retirement. For more information about different investment options available, visit our investments page.

Beware of pension scams

Action Fraud is warning consumers to protect their pensions from fraudsters, as the first three months of this year have seen an increase of almost 45% in reported pension fraud compared to the same period the previous year. Tips on how to protect yourself from pension scams can be found here.

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