Article Summary
A new study reveals that an average saver wants over £30,000 a year to live on in retirement, but their pension pot will only last for around 11 years. The average target pension pot is £253,701, while the target income for retirement is £30,050. The study highlights the value of ensuring savers have the right number of qualifying years in their state pension.
What This Means for You
- Understanding your pension pot and retirement income expectations is crucial to plan your retirement savings effectively.
- Taking advantage of the full new state pension and ensuring the right number of qualifying years in your NICs is essential to increase your retirement income.
- Planning your retirement savings with financial guidance could allow you to retire earlier than you initially anticipated.
- Checking your state pension forecast and topping up any gaps in your National Insurance record can increase your state pension amount.
Original Post
An average saver wants more than £30,000 a year to live on in retirement, according to a new study – but their pension pot will only give them that income for just over a decade before they run out of money.
A survey of 3,000 UK consumers found the average personal ‘target’ pension pot for retirement is £253,701.
Yet the average ‘target’ for personal annual income in retirement is £30,050 (up from £25,679 in 2023), according to the report by independent consultants Retirement Review.
The reality is their target pension pot would likely provide their target retirement income for just 11 years, assuming no lump sum taken and a balanced portfolio with average growth.
Given the average age respondents expected to retire was 65.7 years, this would see them run out of money by age 77.
Alternatively an annuity would give them an income of £19,391 a year. That is a gap of 35% below their income expectation.
Matthew Morris of Retirement Review, said consumers “are badly underestimating the amount they need to save in order to achieve the retirement they want”.
Once retirees reach state pension age, they can expect their income to increase, by as much as £11,973 a year based on current entitlements – assuming they qualify for the full new state pension.
“This highlights the value of ensuring savers have the right number of qualifying years in their state pension,” the report’s authors point out.
A large minority of pension savers just don’t know what to think about their retirement future.
One-third of consumers are unsure of both their current pension pot size and their target savings for retirement, the research found.
Just 6% expect to retire before 60, with nearly one in five (19%) unsure they’ll ever retire – although respondents said that with the right guidance, they might be able to retire earlier.
The number of people who think they could retire before the age of 65 increases from 21% to 28% if they have financial planning.
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