8th March 2016
Eight out of ten of workers are unrealistic about the savings they need for retirement a new study has revealed.
According to research by deVere Group, nearly 80 percent of workers underestimate how much they will need to save into a pension to live a comfortable retirement.
“It is alarming that the vast majority of people do not know just how much they will need to save,” says Nigel Green, chief executive of the firm.
“This black hole in the detail – not knowing how much they will need in something as fundamental as funding their retirement – is extremely concerning indeed.”
When doing the sums while retirement planning, many of people wrongly assume that the government will help fill in the gaps in their pension fund. But figures from the Department for Work and Pensions show that just two thirds of people who reach retirement age next year will receive less than the full “flat-rate” pension from the state thanks to paying lower National Insurance contributions during their careers – a perk of the old pension system.
What’s more, independent research shows that people regularly underestimate their likely life expectancy by five or ten years. Figures from the ONS show that those in their twenties are likely to live to see 100, for instance. According to figures published in The Lancet, the average life expectancy for people in England has risen to 81.3 years in 2013 and with improved medical treatment and diet it is likely that people will have to spend decades out of the workforce at the back end of their lives.
How much you will need to save for your retirement is a very subjective issue, says Mr Green, but people must take their heads out of the sand and get informed.
“The amount you must save into your pension depends on a variety of key factors including your current age, at what age you want to stop working, how much income you will expect in retirement, what your retirement aspirations are, whether you are due inheritances, and your current personal financial circumstances, amongst many others,” he says.
“A failure to plan properly will mean for many that many people will be forced to work longer than they had hoped and/or significantly scale down their retirement aspirations.”