Two thirds of those retiring in 2021 risk exhausting their pension pots, and having insufficient funds to sustain their retirement income, according to a new report from Standard Life Aberdeen.
The research found a 2021 retiree plans to spend, on average, £21,000 a year in retirement – almost £10,000 less than the average UK household income (£29,900).
However while the average value of a pension pot in this cohort is £366,000 – but a third (33 per cent) admitted to having less than £100,000 saved.
An analysis of this data by Standard Life Aberdeen, shows that even with the state pension, two thirds of this group are at serious risk of outliving their pension funds if they spend this amount each year in retirement.
It is clear though that many are concerned about their finances. The research found that more than a third (37 per cent) of those planning to retire this year are worried about not having enough money to last throughout retirement.
Just two in five (39 per cent) feel “very confident” that they’re financially ready to finish working. This figure is higher among men, with just a third (34 per cent) of women feeling “very confident” versus two in five (43 per cent) men.
But despite these concerns, the research showed a significant proportion of this cohort — two in five (37 per cent) — have accelerated their planned retirement date in the past 12 months due to Covid-19.
Lockdown changing their retirement plans, health worries due to the pandemic and job uncertainty were the three main reasons for speeding up their retirement.
Standard Life Aberdeen retirement advice specialist John Tait says: “Vast numbers of those retiring this year risk running out of money in their retirement. Retirement is a marathon, not a sprint, and many could be going into it without sufficient preparation or planning.
“Pension pots are without a doubt the most popular option for funding retirement, but it’s important that retirees consider any other savings or assets they can use when deciding whether they can afford to retire or not.”
Almost half (48 per cent) of those surveyed said they are planning to reduce their usual spending to support themselves in retirement, while a quarter (27 per cent) will work part-time to help financially. One in five (21 per cent) said they are planning to sell their home or downsize to fund retirement.
The research found there are clearly some apprehensions about retiring during a pandemic amongst this year’s retirees. More than half (51 per cent) are worried about not being able to do things they planned, while two in five (43 per cent) are concerned they won’t be able to see friends and family.
When it comes to their finances, three in 10 (29 per cent) have concerns about their pension falling in volatile markets, and almost one in five (17 pee cent) have seen their income fall over the past year.
