20th September 2013
One in five Britons anticipate that they will never stop working as a result of not having saved adequately for retirement writes Philip Scott.
The shocking statistic comes from the latest HSBC Future of Retirement report which found that some 19% of people in the UK now expect that they will never be able to afford to retire fully.
The findings paint an especially bleak picture for those living alone in retirement. The UK topped the league table of the countries with the highest proportion, at 36%, of those who are divorced or separated expecting to work indefinitely – compared to just 20% globally. Some 31% of those who are widowed had the same expectation – compared to 23% globally.
Two fifths of retired people surveyed, at 39%, in the UK said that financially, they had not prepared adequately or at all for a comfortable retirement, with 35% of those people only realising they were under-prepared after retiring.
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However just 2% of respondents who did not prepare adequately or at all said they would have to go back to work to cover their financial shortfall. But a massive 44% are resigned to the idea that they will just never be able to make up their shortfall.
But notably 37% of UK respondents aged between 55-64 years of age said they actually wanted to continue working.
Christine Foyster, head of wealth management at HSBC, says: “People want to slow down in later life and, while some welcome the chance to stay economically active, many may not. Whereas some people regard a comfortable retirement as a natural entitlement, for a growing number this is not the case.
“Life is full of reasons to prioritise short term spending over longer term planning, but the sooner people start saving, the less likely they will have to rely on working in old age.”
HSBC’s study also suggests that even those who do eventually retire might not be able to achieve the retirement they want. Half of retired people surveyed in the UK who said they have been unable to realise their plans for retirement, believed this was because they have less money to live on than they had envisaged.
It found that people’s expectations of a work-free retirement dwindle as they enter old age, with 20% of people between 55-64 years of age saying they expect they will have to continue working indefinitely, compared to just 15% of 25-34 year-olds.
Tom McPhail, head of pensions research at Hargreaves Lansdown says: “It is vital that everyone takes personal responsibility for the retirement savings. The three most important points to address are: Am I saving enough? Is my money invested well? How will I draw my retirement income?
“Unless all pension scheme members are actively encouraged to address these questions and to plan for their retirement, it is likely that dire predictions about millions of people never being able to afford to retire are likely to come true.”
How much do you need to save?
Based on a 22 year old and a 35 year old saving into an auto-enrolment pension scheme at the default contribution rate of 8%, supplemented by a full state pension entitlement. The figures below from Hargreaves Lansdown show the drop in income as they make the transition into retirement at age 68, as well as the additional contributions they would have to make if they want to hit their target replacement rate income in retirement.