Pension alert: Retirement becomes unaffordable for millions – retirees issued guidance | Personal Finance | Finance
Retirement income and the concept of retirement could become irrelevant to many Britons over the next few years, as new research from Canada Life has shown that more than one million British workers (six percent) believe that ‘they will never retire. In addition, 17.1 million working adults (44%) believe they will work beyond the statutory retirement age, down 2.7 million from 51% in 2020.
The woes of retirement
Canada Life research interviewed 2,000 UK adults and extrapolated the results to the general population. The results showed that the biggest concern of UK adults when considering working beyond the statutory retirement age is not being able to take advantage of their advanced age (34%). A third (33%) fear their health will deteriorate because they have to continue working, while more than a quarter (27%) have to or want to work, but fear their health will make it difficult for them to work .
Many Brits also don’t seem to be worried about how they are going to handle their retirement because they just don’t want to. Almost one in four (23%) want to continue working because they enjoy the routine, while one in five (21%) say they enjoy their job and want to continue working.
Among those wishing to work beyond the statutory retirement age, 43% believed that their retirement would not be enough to take full retirement. They suspected that they would need to keep earning money and thought that was a big reason to postpone retirement. A quarter (22%) will continue to work because they don’t know how long their retirement savings will last, while 10% think they’re ready but said their current lifestyle means it’s costing them too much to retire.
Andrew Tully, Technical Director of Canada Life, commented on the results.
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He said: “Despite over a million people believing they will never retire, there is a dramatic drop in the number of people thinking they will work beyond retirement age. , the pandemic has had a drastic impact on this, with many people reassessing how they want to live and what they want to do later in life.
“Digging below the surface, there are various reasons for working beyond the statutory retirement age, or not retiring at all. For some people, the social side of the job would be missed, but for others, financial considerations are a key factor. As an industry, we need to find ways to encourage greater engagement in long-term financial planning to ensure that people have confidence that they are saving enough for retirement.
“Auto-enrollment has been a huge success, but we need to think about how we encourage higher levels of savings, perhaps by introducing automatic escalation when it comes to payroll reviews. For example, the employee receives a salary increase and automatically a percentage of it goes into the pension as additional savings.
“Consideration should also be given to extending automatic enrollment as soon as possible to workers who are not currently supported, including low-paid and self-employed. This would help level the playing field for pensions. “
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How to keep your retirement plans on track
Fortunately, Mr. Tully has gone on to give a number of tips to worried workers who want to secure a comfortable retirement.
He said: “A rule of thumb suggests that you should save half your age as a percentage of your salary to enjoy a reasonable retirement lifestyle. So if you are now 25, you should save 12. , 5% of your gross salary in a pension If you are 40 years old it should be around 20% These figures are examples based on someone starting to save today and include both your contribution and that of your employer.
“While that sounds like a lot of money and can seem scary, starting as early as possible and saving regular amounts can make a big difference to the bottom line because of the ‘magic’ of interest compounding.
“If you can, take advantage of any employer for the extra contributions you make to your pension.”
Taking a more active approach to how your pensions are invested could also pay real dividends down the line. Sacrificing a little time now adds years to his retirement years.
Mr Tully continued, “Remember that you could enjoy more than 30 years in retirement, so your pension has to go a long way. The length of time you save and the choices you make about investing can also have a bearing. important effect on the size of your pension pot.
“Don’t have all of your eggs in one basket, say one property. Balance your investment choices between asset classes. Take an active part in reviewing your annual retirement statements, don’t put your head in the sand. Seeking professional advice will help keep your plan on track.
He concluded: “Retirement can seem like a long time away, and as a result, decisions to save for the future can seem like an easy decision to put on hold. It’s also difficult to balance financial priorities, but anyone who hopes to rely on their state pension is unlikely. enjoy the retirement they worked hard for.
“Living for today and hoping for the best for the future won’t work for most people. Taking control and saving a little now for the future not only creates a great saving habit, but also gives you the best possible chance of financial security in your future life.
This advice will likely be needed by more people than initially expected, as further research from WEALTH at Work has shown that many Britons overestimate their financial capacity but are not saving enough for their retirement. A company survey of 1,025 UK adults found that six in ten people (63%) think their financial literacy is excellent or better than average, 41% know they are not saving enough for a day. comfortable retirement.
The same research also found that 16 percent of Britons don’t know if they are allowed to pay more into their occupational pensions and 14 percent don’t know how much their employer contributes.
Jonathan Watts-Lay, Director, WEALTH at Work, commented on the results.
He said: “It shows that it’s quite common for people to overestimate their financial capability. After all, people don’t know what they don’t know.
“They may think their financial literacy is excellent, or at least above average, but the reality is, in many cases, they are not saving enough for retirement and do not know how to get the most out of their retirement from work. .
“Financial education and guidance in the workplace can empower employees to realize how valuable workplace pensions are and how to maximize their savings. For example, how they could free up money to make sure pensions are affordable.
“Many companies now see the benefit of seeking specialized financial wellness services to help employees improve their financial futures, covering everything from managing money and debt to maximizing benefits. employer sponsored pension and social benefits. “
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