Retirees planning for a £250k pension pot only got £131k upon retirement, leading to a £480 monthly income reduction.
New findings from Standard Life’s Retirement Voice Report shed light on the retirement savings landscape in the UK which highlighted the discrepancy between UK retirees’ ideal retirement savings and their actual retirement savings.
It found that although retirees had planned for an average pension fund of £250,000, by the time they retired, they had only accumulated an average of £131,000, leaving a £119,000 deficit.
It also found that half of the retirees feel regret for their financial planning; 53 per cent wish they had started saving earlier, and 42 per cent regret not getting advice or guidance.
Assuming retirement at age 66, a pension pot of £250,000 could provide an income of £1,007 per month or £12,091 annually based on current annuity rates. In contrast, a £131,000 pot may yield £527 in monthly revenue or £6,332 annually; this would indicate a £480 monthly shortage or £5,759 annual shortfall. But even the sizeable £250,000 fund is insufficient to support a “moderate” retirement level as specified by the PLSA, which includes the state pension.
Standard Life managing director for retail direct Dean Butler says: “It can be hard to work out how much you need to save to achieve your desired standard of living in retirement, particularly earlier on in your career. It’s even harder to stick to it, as everyday expenses and those one-off costs that come up in life constantly threaten to move long-term saving down the priority list. Clearly, there’s a big gap between what people hope to save, and what they actually do – this is unsurprising, particularly when looking at it during a cost-of-living crisis, however, the result can be a significantly reduced standard of living in retirement.
“Access to affordable personalised advice and guidance is crucial to closing the gap – as things stand, way too few people feel able to get advice and we can see that people then regret not doing so. Ultimately, contributing as much as possible, as early as possible is the key to a good retirement outcome, but it’s a huge challenge to know what to aim for and when to prioritise long-term saving over more immediate priorities.”