A lot of confusion still exists around retirement in the UK, and how much we actually need to put away for it…
Research
A study by Oxford Risk surveying over 1,000 people over the age of 55 has found that only 38% of over-55s are clear on how much money they will need when they stop work. They also found that 27% are not on track to retire at their target age and 35% don’t believe they will be able to afford the retirement they want.
Their findings also highlighted a gender gap, with around 31% of the women they surveyed saying they were not on track to retire at their target age compared to 22% of men. Additionally, 40% of the women responding believe they will not be able to afford what they want to do in retirement, compared with 29% of men.
“Millions of over-55s are struggling to get to grips with retirement planning and are not clear on how much money they will need and whether they can afford to fund their retirement.” – Dr Greg Davies, Head of Behavioural Finance at Oxford Risk
Additionally, research from Key, which surveyed 1,000 over-55s, found that around 22% of respondents said they were very worried or extremely worried about whether they had enough retirement income to live on. Furthermore, 41% said they are concerned about the risk of having to take on unsecured debt to boost their income in retirement.
They found that around 65% of respondents were worried about paying their mortgage into retirement and how this may impact their retirement income, with half worried about keeping up with or paying off mortgage payments.
The Institute for Fiscal Studies also found that there is a very limited understanding of pensions in the UK and that many people are pessimistic about their potential standard of living in retirement.
What Are the Dangers of Us Not Understanding Our Pensions Properly?
This blog has only drawn upon a few studies but there is an entire wealth of research telling us that there is a lack of understanding surrounding how pensions work.
This means that many of us risk under-saving for retirement, meaning that we may be unable to achieve the standard of living that we aspire for, or expect, in retirement.
Additionally, if we don’t understand our pensions, we may not end up managing them and utilising them in the most efficient way. It can be really easy to forget about our pensions until it comes to trying to access them. However, it is important to regularly review our pensions to:
- Understand any fees you might be paying
- Keep an eye on the balance so you can see if you want to increase contributions or not
- Estimate your retirement income
- Monitor any investment performance
- Decide whether or not to consolidate multiple pensions, e.g, what is the transfer cost?
- Avoid forgetting about old pensions and having to chase them down in later life
Not only does that open us up to not saving enough for retirement, or not utilising our finances in the best possible way, but it can also leave us susceptible to scams. Many scammers will prey on individuals’ misunderstanding of how their pension savings work to help them gain access to that money. There are a number of red flags to keep an eye out for to help you avoid falling victim to pension scams, click here to help stay safe.