Paying into a pension scheme each month is something which many people will do in preparation for their retirement. However, more than two thirds of savers don’t know what their pension pots are due to be worth when they retire, according to recent research carried out by Foster Denovo Limited.
Giving their estimations, the average response came in at £125,700.
However, Foster Denovo Limited has suggested that this could be a significant underestimation for a comfortable retirement.
Research carried out by the consumer group Which? estimates that for a comfortable lifestyle in retirement, the average Briton would need £215,450.
This would be needed to provide a salary equivalent of £27,000 per year from income drawdown.
For a more luxurious lifestyle during this time of life, Which? estimates £502,775 would be needed for a post-tax drawdown income of £42,000 per year.
Jamie Smith, a financial adviser at Foster Denovo, said: “Our research shows that on average consumers are underestimating how much they will need for a comfortable retirement by around £100,000.
“What is more concerning however, is that despite this disparity, confidence of being on track is still very high.
“These figures would be worrying enough on their own, but in the current environment whereby savers are seeing their pension pots impacted by market volatility and record falls, it highlights that far more is needed to be done to educate savers.
“With 60 percent of people surveyed having said that running out of money is their biggest concern in retirement, it is vital that people understand how much their pensions are worth to ensure they are able to retire comfortably, instead of living in the fear of running out of money.
“Now is a particularly worrisome time for investors but despite the current volatility we are experiencing, it is important to not make knee jerk reactions, but instead follow the right advice and guidance to put in long-term plans to achieve realistic and properly informed goals.
“The good news is that it is never too late to improve your quality of life in retirement.
“However, the later you leave it, the more you will have to save each month so we would urge people to arm themselves with the right information and take formal advice where they can.”
The Pensions and Lifetime Savings Association (PLSA) published new UK Retirement Living Standards in October last year.
It said that for a single person, the “minimum” retirement lifestyle requires £10,200, and £15,700 for couples per year.
For a moderate lifestyle, this comes in at £20,200 for single individuals, and £29,100 for couples.
And, for a comfortable lifestyle, the figure is £33,000 for those who are single and £47,500 for couples.
All of these figures are based on the assumption that the people are living outside of London.
The PLSA adds that a person may need to add other costs depending on their circumstances, such as mortgage, rent, social care costs, and any tax on pension income.
Published at Thu, 21 May 2020 16:52:00 +0000