According to recent statistics from the Office for National Statistics (ONS) 17% - or the equivalent of nearly one in five UK pensioners - are surviving solely off State benefits, with no personal savings or investments. Arguably, this situation will change in years to come – with people entering retirement who have benefited from auto-enrolment. But, for those near to or just entering retirement, the next few years – perhaps decades – could be a struggle financially.
These figures show how critical it is to start saving for retirement, particularly if you don’t want to be relying on the State pension or feel you need to continue working into your 60s or even your 70s. Interestingly, the ONS figures reveal that 17% of pensioner income is earnings – which means there are a lot of people out there still working, while others have retired.
Figures, also from the ONS, show that even if pensioners have some sort of personal pension, an average 43% of pensioner income is State benefits. Today’s full State pension entitlement is broadly £165 per week. This means that a total income retirement of about £20,000 per annum is being received by these pensioners. Would this be enough to live on comfortably? By retirement, many people would have paid off their mortgages – which accounts for a large proportion of monthly bills for many people pre-retirement. But, for people, after other bills and basic living requirements - £20,000 would still be a bare minimum.
Many commentators say that the introduction of the Pensions Dashboard will help retirees in the short term to discover any pension funds they might have forgotten about or simply lost.
According to the FT, it is hoped that the government's dashboard will be developed and ready to test later this year, with it expected to go live no later than 2023. The launch has been delayed, as it is an enormous job; some pensions might only exist in paper format and in some cases, names and addresses will have changed.
Moving forward, the Pensions Dashboard should enable generations to be better informed about the income they are likely to receive in retirement and plan accordingly.
According to the Department for Work and Pensions there is over £400 million sitting in lost pensions. In some ways, this isn’t surprising, as we now have an average of 11 jobs in a lifetime which could all, potentially, have given us a different pension. Add to this any private pensions and the State Pension and our retirement savings can look very complex.
Having all this information in one place is likely to result in two differing reactions from a consumer – either shock about just how much they’ve got saved up or shock about how little!
While the notion of viewing all your pensions in one place seems sensible, this is not the whole story. Although the figures are there, it doesn’t tell somebody whether the amount they have saved is appropriate to see them through retirement and it doesn’t explain if the investments made are suitable for that person’s situation and whether there are death benefits attached etc.
With people living longer and the amount of retired people set to increase, relying on the State to fund our retirement is looking less and less feasible. The key is to get advice and to start saving.
At The Goodman Partnership – retirement planners in Tunbridge Wells - we provide clients with an overview of their investments and then use our experience and expertise to ascertain if the investments they have will work for them.
Give us a call on 01892 500600 or visit our Retirement Planning page.