Nearly Half of Britons Fear Their Pension Won’t Last Through Retirement

According to Investec Wealth & Investment’s latest report, a staggering 48% of individuals express apprehension that their pension savings may not suffice for their retirement years. The study underscores a prevalent unease about financial security in later life, with a notable 56% admitting to insufficient retirement savings.

The gender gap in financial worry is evident, with 61% of women voicing concerns over their retirement funds, in contrast to 53% of their male counterparts. Interestingly, while older demographics typically exhibit less anxiety, a significant one-third of those over 65 still fear their money may run out during retirement. A key factor contributing to peace of mind among the less concerned over-65s is the possession of a final salary pension, a benefit enjoyed by 43% within this group.

Understanding Pension Schemes

The concept of a final salary, or defined benefit scheme, offers a guaranteed income post-retirement, based on the individual’s salary and tenure with their employer. However, the availability of such schemes has dwindled, primarily limited to the public sector, leaving most new entrants in the private sector with defined contribution pensions. These plans, while more common, place the investment risk squarely on the saver, unlike their more generous and secure predecessors.

A Generational Worry

Alarm over pension adequacy spans generations, with those aged 45 to 54 and the under-45s particularly troubled about their financial future. An overwhelming 70% of the former and 67% of the latter group express concerns over their pension size, fearing it may not be enough for a comfortable retirement.

Regional Reflections

The apprehension isn’t uniformly distributed across the UK, with Scotland and the South East showing higher levels of worry. Conversely, regions like the East of England and Yorkshire & the Humber have a majority feeling more secure about their pension savings.

Expert Insights

Ade Babatunde, a chartered financial planner with Investec, said, “It is worrying to see the high numbers of people with retirement savings who are worried about running out of money in retirement and not having enough money saved. Some of it may be explained by people worrying ahead of their actual retirement and that is a good thing if it encourages them to save more and to seek professional financial advice. Ideally people should save as much as possible for as long as possible and we would urge anyone concerned about retirement savings to talk to a financial adviser.”

The Cost of a Comfortable Retirement

The Pension and Lifetime Saving Association sheds light on the escalating costs of maintaining a ‘moderate’ lifestyle in retirement. A stark increase in the required annual income for pensioners to achieve this standard of living accentuates the urgency for robust retirement planning. The association notes a 27% hike in the requisite income for couples, underscoring the growing financial challenge for retirees.

Income Decline Post-Retirement

Investec’s research further reveals a troubling trend of declining monthly incomes among retirees, with a significant portion experiencing a reduction of more than 50%. The future outlook for those yet to retire isn’t much brighter, with a majority anticipating a decrease in earnings post-retirement.