A new report from insurance company Prudential says British workers expect to retire well before state pension age, but they may be disappointed as one in 10 won’t begin saving for retirement until they are 46.
“As people’s retirements get longer, the responsibility for funding them will shift even further towards individuals,” said Vince Smith-Hughes, a retirement income expert at Prudential. “Pensions are about saving for the long term, so the best way for most people to secure a comfortable retirement is to save as much as possible from as early as possible in their working life.”
Prudential’s “Intergenerational Retirement Study,” which investigated the retirement preparations of different age groups across the country, found that 11% have yet to start saving into a pension, and the average starting age for those who are saving for retirement is 27.
The study also found that most workers in the UK expect to retire before the state-mandated pension age; and younger workers expect to retire much earlier than older workers – almost twice as early. Workers between ages 21 and 30 expect to retire seven and a half years before they reach pension age, while workers between ages 51 and 65 expect to retire just over four years before pension age or less.
“For many people with a specific retirement date in mind, it is likely that a consultation with a professional financial adviser will help to put a savings plan in place to make sure they meet that goal with sufficient savings in their pension pot,” said Smith-Hughes.
According to the study, 53% of workers under the age of 40 estimate that their retirement incomes will be equal to or below the average incomes of those retiring in 2016. “This means that people who are anything up to 45 years away from retirement are expecting to be able to live on £17,700 or less per year,” said the report, “which of course will be worth considerably less in real terms, when they give up work.”
Prudential’s research also revealed that younger workers aren’t as confident about their retirement prospects as their older counterparts are. Approximately18% of workers under the age of 50 said they are worried that their savings aren’t on track, and that they’ll have to work past their desired retirement age. Another 37% said they fear they have only saved enough to just get by in retirement. Meanwhile, 87% of workers aged 51 to 65 say they are on track to retire when they planned to, the majority of whom expect to live a comfortable retirement.
“The desire to retire as early as possible is completely understandable,” said Smith-Hughes. “But with life expectancies increasing all the time, and the average retirement now lasting over 20 years, it is unlikely to be achievable for everyone.”