It’s a question on many minds as we approach retirement: will my pension be enough? New research suggests that many people are unsure.
The results are pretty stark: half of those with pensions are confident they’ll have a comfortable retirement, while the other half are worried.
This gap is particularly pronounced among younger adults, who are more optimistic about their future but also more concerned about climate change and other social changes impacting their retirement.
What Makes Savers Confident?
So what are the factors that give some people a sense of security?
- Investments: Those feeling confident often have investments outside their pension, such as property or shares.
- Home Ownership: Owning your home provides a solid financial foundation for retirement.
- Auto-Enrollment: One in five people were confident because of being automatically enrolled into a pension. However, remember that these minimum contributions are unlikely to be enough for a truly comfortable retirement.
- Final Salary Pensions: A smaller percentage, just 8%, said they were confident because of a generous final salary pension.
Why are Some Savers Worried?
On the other side of the coin, here are the most common reasons why some people are unsure about their retirement:
- Not Saving Enough: Many people feel they simply aren’t saving enough to meet their retirement goals.
- Not Earning Enough: Low wages can make it challenging to save for a comfortable future.
- Limited Savings: Many savers are concerned about having no other savings or investments outside their pension.
- Rent Costs: Those who are still renting in retirement worry about the ongoing cost of rent.
How Much is Enough?
Research from Scottish Widows shows that many people have no idea how much income they’ll need in retirement. The average estimate for a comfortable retirement is £29,000 a year per household.
But hold on! This is far less than what experts recommend.
A recent study by the Pension and Lifetime Saving Association (PLSA) suggests a couple needs £59,000 a year to be comfortable in retirement. A single person needs £43,100 a year to cover basic needs, along with some extra luxuries.
These figures assume you get the full state pension, but don’t include income tax, housing costs, or care fees.
Are You on Track?
The research paints a concerning picture. Many people are approaching retirement with uncertainty about their financial future.
- Over 30% of those planning to retire in the next two years are not confident they’ll be able to live comfortably.
- Those aged 51 to 55 are the least confident about retirement.
What Can You Do?
It’s not all doom and gloom. You can take steps to improve your retirement prospects.
- Increase Your Contributions: The more you save, the more you’ll have in retirement.
- Check Your Employer’s Contributions: Make sure you’re getting the maximum contribution possible from your employer.
- Use Pay Rises Wisely: Increase your pension contributions when you get a pay rise.
- Get Informed: Take the time to understand your pension and how it works. There are many online resources available, including the government’s Money Helper site.
Don’t Forget Your Pension
If you’re worried about your savings, take a close look at your existing pension pots.
- Current Fund Value: Find out how much money you have in your pension.
- Transfer Value: If you’re considering moving your pension, find out if there are any penalties.
- Pension Type: Is it a final salary or defined contribution pension?
- Guarantees: Are there any guarantees that you might lose if you transfer your pension?
- Pension Projection: Use a pension calculator to see if you’ll have enough money at retirement.
The Bottom Line
Retirement can be a time to enjoy life, but it’s important to plan ahead. Don’t leave your financial future to chance. Take steps today to secure a comfortable retirement.