Tomorrow's retirees set to live on the poverty line – UK pension delivers 90% less than desired requirement
• Research reveals that tomorrow’s retirees are set to live on the poverty line, adding to the one million impoverished pensioners already doing so in Britain
• Analysis of 10,000 active pension planners reveals the average fund size is just £33,000
• Pensioners will be left with a disposable income of only £39.66 per week – meaning that even with the state pension, retirees will not have enough money to cover the cost of living
• The data analysis reveals an alarming number of misinformed and ill-prepared pension planners in advance of the April 2015 reforms
• Warrington-based firm – Avacade Future Solutions – calls for the rest of the industry to take action
Warrington-based pensions consultancy, Avacade Future Solutions, has analysed its own data of 10,000 UK pension planners to discover that the average retiree will receive 90% less than what they desire to live on in retirement. The research suggests a bleak future for tomorrow’s pensioners, with many set to spend their pensionable years on the poverty line.
Avacade’s research revealed that the average pension pot size is only £33,000, a figure that equates to just £39.66 per week if they were to retire now1. With the average living cost for a pensioner revealed to be £199.752 per week, even if they were to receive the maximum state pension – £148.40 – tomorrow’s retirees will only have £188.06 to spend each week. This worrying statistic underlines just how many will have insufficient funds to live on in retirement. Indeed, with recent analysis revealing that more than one million pensioners in Britain are currently living in poverty3, Avacade’s profiling of those planning for retirement demonstrates that the trend may not only continue, but in fact increase.
The exploration of Avacade’s data unearthed a significant contrast between what the UK pensioner hopes to receive in retirement, and the reality of what they will achieve. The average target fund size required for the sample to attain their retirement desires is £334,102, based on the majority of the sample hoping for £12,000 per annum in retirement. However, the analysis revealed that planners throughout the UK only have a pension pot of £33,000, which equates to a 90% deficit. The substantial discrepancy between desire and reality reveals a misinformed and subsequently unprepared pension planner, particularly when many are due to gain full access to his or her pension fund in less than six months. The Budget reforms announced for April will see – for the first time in UK pension history – the critical mass of pensioners handed significant financial freedom and control of the largest sum of personal finance many will ever need to manage.
Avacade’s Pension Survey Data Report not only outlines the findings in more detail, but also officially launches the company’s new business direction – formed in direct response to the reforms that are set to revolutionise the pensions landscape. Supporting the firm’s decision to enhance its service offer, industry research exposes a staggering 71% of Britons4 who admit to not understanding the pension changes announced in the Budget, or the wider implications to their retirement fully. This worrying figure reflects a wider population of “nearly retired” who are confused with regard to the most strategic method to plan their pensionable years. Avacade’s extensive research, launched today, champions a call to action for the pensions industry to respond to an overwhelming need to facilitate further awareness and insight around the pension process.
Given nearly half (44%) of customers due to retire within the next decade will be looking to advisors for help in making financial choices5, there is a key drive and desire for information. However, there is currently a significant lack of accessible insight, both in respect to the calibre and the accessibility of any information supplied. To that end, Avacade Future Solutions has developed a suite of industry insights, ranging from whitepapers to pension guides, developed to inform, contextualise and educate the UK pension planner.
Planning for retirement is one of the most important life decisions anyone can make, however, Avacade’s in-depth analysis discovered that the average person only begins reviewing their pension aged 51. It also appears that those in relationships are more likely to plan their finances, with the majority (54%) being married when they review their pension. Indeed, only one in five (19%) are single, and even less (11%) are divorced when they review their pension opportunities.
Lee Lummis, Managing Director, Avacade Future Solutions, said:
“The pension reforms announced in the Budget are changing the marketplace considerably. We are delighted to say that we have evolved with them, and are excited about the new direction we are taking. Our research has supported this decision. Discovering that without reviewing the pension options available, many people in the UK would be left with so little in retirement – £39.66 a week – it is clear that our service to offer insight-led and IFA-backed consultancy is very much in demand. We believe the rest of the industry needs to recognise the number of people that are ill-prepared for retirement and ensure they are given the tools to secure their financial futures.”