The picture of retirement income in the UK is not as bleak as some would like us to think
A report has revealed those approaching retirement are expecting to receive £23,700 per year when they retire. The same survey shows that the average income in retirement today is currently just £19,000 – a shortfall of £4,700 per year, or 25%.
Old Mutual Wealth published its first ‘Retirement Income Uncovered’ study that also unearthed a new magic number for retirement income of 47% of pre-retirement income. On average, people are hoping for around half of their current salary when they retire, and those who stated they were satisfied with their income have achieved 47% of pre-retirement income.
‘Retirement Income Uncovered’ looks into the level and source of retirement income for people already retired from full-time work, plus those over 50 approaching this crucial part of their financial lives. The report provides a concise picture of current and changing sources of retirement income, changing attitudes to work in retirement and also levels of satisfaction and understanding of the different sources of retirement income.
Other key findings of the report are:
We expect retirement to last for 21 years
41% of retirees receive less than £15,000 per year
There is a £7,000 gap between men and women’s average income in retirement
The changing face of retirement
Those approaching retirement are
25% less dependent on a final salary
pension compared with retired people
Those who have a retirement income goal are 63% more likely to be satisfied with their retirement income than those that do not
Those who had a target income in mind before they retired have an additional £157,500 income over the course of an average retirement
Retirees who used a financial adviser are more than twice as likely to have a target income in retirement – with an average income of £26,000
The emerging world of pension drawdown
Using pension drawdown can reduce the pension pot required by 25% to generate the average income of £19,000
Even as income drawdown hits the headlines, only 17% claim to have a good level of understanding of it
Making a greater contribution to those yet to retire In addition, the report examines how pensions may contribute less to retirement income in the future with other sources expected to make a greater contribution to those yet to retire – property downsizing contributes an average 2% to those currently retired, yet rises to a 15% expected contribution for those yet to retire.
The survey also shows that people approaching retirement are not the ‘rabbits in headlights’ that many describe. Far from being frozen in fear, the study uncovers a pragmatic Britain that is adjusting expectations and facing up to the challenges of a retirement that people realistically expect to last for more than 20 years.
Retirement income is changing and people are preparing to use many different sources to fund this stage of their lives. The ‘Retirement Income Uncovered’ findings show that people are adapting their behaviour accordingly, and the picture of retirement income in the UK is not as bleak as some would like us to think.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.
Old Mutual Wealth partnered with YouGov to conduct research into the attitudes and behaviours of those currently in retirement or approaching retirement. The research was carried out via an online survey amongst YouGov’s consumer panel. The sample consisted of 1,536 UK adults aged between the ages of 50 and 75. The sample was split up into five brackets (50-54, 55-59,
60-64, 65-69 and 70+) with a target quota of 300 participants in the research from each age bracket. YouGov invited a nationally representative sample to take part within each age bracket. Fieldwork was carried out between 4-10 July 2014.