Stark warning that nine out of ten could miss retirement goals

30th April 2014

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Nine out of ten Britons are at risk of missing their retirement goals according to a new UK Readiness report by pension firm Aegon.The average shortfall between the UK’s retirement ambitions and reality, given what they have saved and invested so far, is £23,000.

Aegon has also launched a new service called Retiready a new retirement and investment platform designed to help people establish their retirement ambitions and invest.

Having asked 4,000 people a large number of questions about their finances and awareness, the firm came up with this worrying number.

Expectations vs. reality  

Based on the survey, the firm suggests that the UK achieves an average readiness score of 52 out of 100, with most are unlikely to match their retirement expectations with their income reality. Using its methodology, just 7 per cent achieved the readiness score of 70, the level required to demonstrate they are close to being on track for the retirement they hope for.

The report found that, on average, the UK wants an annual retirement income of £35,000, but at their current trajectory they are set to see just £12,000 a year when they reach the end of their working life, which it says reveals a huge gap between expectation and retirement reality.

When it comes to awareness of how to plug this shortfall, just 3 per cent received a score that suggests they know how to improve their financial position.

State pension confusion

The research shows that well over half of the public or 56.4% believe that the maximum basic state pension is higher than £110.15 per week.

People are also expecting to retire earlier than the state pension age. By 2018 the state pension age will be 65 for both men and women. At the moment the UK population, on average, is expecting to retire earlier, at around 63 years of age.

The state pension age will rise to 68 by the time under 25s hit retirement. However, this age group currently expects to retire at 64.

A third (30%) of respondents have never looked to change their retirement plans, and 42 per cent have never checked the performance of their existing retirement savings.

Men vs. Women

Looking at the gender divide, men are more prepared for retirement than women, but only by a small margin. Men are more likely to have reviewed pension planning within the last year, and are making significantly higher regular pension contributions (£328 vs. £175 per month). There is a four per cent gap in the overall readiness score which could be put down to women’s much lower expectations about their retirement income (men – £47k, women – £24k), though this means women’s retirement reality is more achievable.

 Gen X vs. Gen Y

Comparing the generations, 16-24 year olds are not as ready as those aged 55 to 64, with a four point lower readiness score. Those approaching retirement are understandably much more hands on, with 48 per cent of 55-64 year olds having reviewed their retirement plans in the past six months, while only 22 per cent of 16-24s had.

Younger people have twice the income expectation in retirement of their older counterparts (£42k vs £21k), so planning needs to start early.

David Macmillan, Managing Director, Aegon UK says: “We know that most of the UK population are falling short of their retirement objectives, and that many aren’t reviewing savings enough to be aware of the shortfall. It’s time for the UK to get real, and for the pensions industry to lead the way in helping people find solutions. Showing people how to take small steps that will make a difference is vital. We must empower, rather than frighten people, and help them take control of their future finances.”

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