Most Brits Haven’t Saved Enough for Their Golden Years

As many of us dream about a peaceful and financially secure retirement, a recent study has brought to light a concerning reality: less than 40% of UK households are on track to achieve even a modest level of income in their retirement years. This finding is a wake-up call for those who haven’t yet started planning for their post-work life.

According to the research conducted by Hargreaves Lansdown, only 39% of households are saving enough to enjoy a ‘moderate’ retirement lifestyle. The picture is even more daunting for those aspiring to an affluent retirement, with a mere 13% of households overall and 30% of higher-income households on course to achieve this.

What Does a Comfortable Retirement Cost?

So, what does it take to retire comfortably? For a single person, an annual income of £37,300 is needed, while couples require £54,500 to live an upscale lifestyle. These figures, calculated by Hargreaves Lansdown and the Pensions and Lifetime Savings Association (PLSA), highlight the kind of expenses retirees can expect to face.

Lifestyle Adjustments in Retirement

The study warns that many may have to significantly reduce their spending compared to their working years. This is especially true for higher earners who are used to a more lavish lifestyle. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, points out that adjustments will be necessary, especially for those accustomed to luxurious holidays and extravagant spending.

The Financial Resilience Gap

Interestingly, the study also reveals a widening financial resilience gap between higher and lower earners. While higher earners have seen an improvement in their financial resilience, lower-paid households continue to struggle. This disparity underscores the importance of planning and saving for retirement, regardless of one’s current income level.

Tips for Boosting Retirement Savings

Morrissey suggests several strategies to improve retirement prospects:

  1. Increase personal contributions: Boosting your pension contributions can significantly impact your retirement savings.
  2. Employer contributions: Check if your employer offers matching contributions and take full advantage of this benefit.
  3. Track down old pensions: Consolidating multiple pensions can reduce costs and simplify management.
  4. Be cautious with consolidation: Ensure you’re not losing out on valuable benefits or incurring exit fees when consolidating pensions.

Understanding the Study

Hargreaves Lansdown’s study is based on data from its Savings and Resilience Barometer, developed in partnership with Oxford Economics. It utilises data from the Wealth and Assets survey by the Office for National Statistics and other official sources. The barometer evaluates financial behavior across five pillars: debt control, family protection, emergency savings, retirement planning, and investment strategies.