New analysis from Broadstone of the Department for Work and Pensions1 latest survey, Planning and Preparing for Later Life 2024, show the gap people need to fill between their income aspirations in retirement and the amount provided by the State Pension. People aged 40-75 who are yet to fully retire said, on average, that they need an income of £30,525 to live on in later life. A single pensioner today on £30,000 per annum will be in the top 15% of pensioner income.
Given that the State Pension currently provides an income of £11,973 a year, this leaves a gap of £18,552 a year that needs to be filled by pension money, additional state benefits or other savings and investments.
To put this into perspective, if all of this money was to be provided by purchasing an annuity age 66, it would require a pension pot of around £330,000. More than a quarter (27%) of these people also said that they expected the State Pension to deliver over 70% of their retirement income with 15% expecting it to provide more than 90%.
It follows worrying findings in the survey data which showed over a quarter (26%) of retirees aged 40-75 said that they felt financially worse off in retirement than they had expected.
David Brooks, Head of Policy at Broadstone, commented: "This analysis shows a disconnect between people’s expectation of their income needs and the savings required to secure that income. In general, people are over-estimating what is an achievable and necessary income in retirement. While we don’t want to deter savers from targeting over £30,000 a year, that objective needs to be based on reality and the ability to balance needs both pre and post-retirement.
“There is possibly also an underestimation of the savings required to reach these income goals with a large gap needed to bridge what the State Pension will provide and what people believe they need in retirement. The purpose of the Pensions Commission will be to examine how they can enable people to save adequately so that they can contribute enough into their private pension or other savings vehicles. There are likely to be innovative mechanisms to achieve this beyond just ratcheting up mandatory employer and employee contributions such as the suggestion of pension side-car savings.”
|
