Yet another wave of research confirms retirement savers are not putting enough money aside to fund their later years.
More than a quarter of savers (28%) have no idea how much money they have in their pension pots, while 42% do not know how much income their current retirement savings is likely to generate in retirement.
The study by Fidelity Worldwide Investment quizzed 2,000 workers about their financial expectations for retirement.
The report showed most over 55s approaching retirement need an annual income of £21,734, but could only expect an income of £13, 972 a year on their current savings.
Two-thirds of those approaching retirement also felt they needed more than the estimated basic pension income of £11,876.
Optimistic pension forecasts
However, 39% considered achieving a higher income as optimistic and believed they could not afford to plan on any luxuries in their retirement.
The study also revealed what people expect to do in their retirement –
- A third wanted a two-week holiday each year costing £2,000 or more
- 30% want to regularly dine out with friends at a cost of £2,200 a year
- 26% wanted four weeks holiday every year costing £3,750
- 25% planned home improvement of around £2,000 a year
Chris Davies, head of Fidelity Wealth, said: “Most people look forward to retirement, but very few are ready for the financial implications of swapping a salary or regular earnings for a fixed income.
“It’s a shame so many people do not have any idea of what their likely income will be or whether this will be enough to cover the things they want to do. Putting off the fateful day of assessing retirement income doesn’t help.”
Meanwhile, Andy James, advice policy manager, at financial firm Towry has considered how changes to income drawdown regulation, and purchasing annuities will affect retirement income.
“Taking the government actuary department (GAD) rate for pension drawdown back to 120% will certainly help many who have retired and seen falling annuity rates and the decrease in the GAD rate to 100% limit their spending power,” he said.
The problem, says James, is increasing the rate may just mean pensioners increase amount of money they drawdown rather than considering whether they need the extra cash.
“Drawdown is flexible, so rather than take the same amount every year, you can adjust your income to match your spending and leave any extra cash in the fund rather than depleting it too quickly,” he said.