News & Views

Are we saving enough for our retirement? Here’s a set of figures that suggests we’re not

17th October 2019

A recent article in the Guardian, identified figures that show that, on average, people in the UK are not saving enough for their retirement.

According to data from the Financial Conduct Authority (FCA), people in the UK have an average pension pot of only £61,897. This will give an average pension of £2,500 per annum. FCA data suggests that most people actuall need a pension pot of £250,000. This is based on research that most retirees spend about £2,200 per month or about £27,000 per year.

HMRC states that the average sum paid into a pension by individuals in 2017 -18 – which was down from £2,900 in the previous year. If you were contributing at that rate for 30 years then that would only give you a pot of £81,000. Even with an equal contribution from employers, this would still leave you well short of the £250,000 target.

Pension plans were accessed by 48% of the UK population without any financial advice, according to the FCA. At RobMac we have written extensively of the pros and cons of getting financial advice with regard to pensions and retirement planning as it is an ever changing and complex area for most people. The trouble is that many people don’t know where to start when looking for financial advice despite there being government schemes such as The Pensions Advisory Service and Pension Wise. And that’s before you start talking to independent financial advisers like ourselves.

This is the average amount that people take out of their pension every year. So, for every £10,000 a person has in their pension, they take out £800 per year. This means that you are likely to run out of your pension before the end of your life. The target withdrawal should be around 3 – 4% per annum.

All of the above suggests that much more needs to be done in order to help people to prepare for retirement, especially as people are living longer than previous generations. Finance education should start as early as possible – see our article Education is one thing and regulation is another. Auto-enrolment does mean that everyone should now be contributing to a pension but the levels are still below what most people need when they retire. And advice, which where we at RobMac come help.

If you’d like to discuss any of the above then please click on the link to make an appointment to discuss your situation with one of our advisors.