A nation unprepared for retirement
A quarter of working people over the age of 55 are not paying into a pension, according to new research by Confused.com. This highlights a worrying reliance on the state pension, which currently stands at £110.15 per week.
In fact, an alarming 31% of wage-earning Brits are not currently paying into a pension. Worse still of those who don’t have a pension, less than 1 in 5 have other investments or savings to fall back on when they retire.
However, even those who have put their future retirement provisions in place aren’t fully clued up about their pension plans. A third of those (33%) who have a pension are unaware of how much they’re actually paying into their pot. Worryingly, 33% of over 55s were unsure around this subject.
In addition to not knowing the amount they are paying every month into their pension, many Brits over 55 are also unaware of their financial security when they come to retire.
Of those over 55 questioned, 17% admitted that they weren’t sure if all their debts would be paid off by the time they reach retirement age and 12% acknowledged that they expected to enter retirement debt ridden. With potentially no income and reliant on a state pension of £110.15 a week, these over 55s are likely to struggle to cover increasing costs of living and also pay off outstanding debts.
Top 5 regions where people don’t know what an annuity is:
1 Wales 53%
2 West Midlands 48%
3 North West 48%
4 South West 44%
5 London 44%
The research clearly illustrates a lack of understanding from the British public about their financial future and in particular how they will fund their retirement. When questioned about retirement income, only 22% of the population fully understood what an annuity (what is typically bought with your pension pot) was.
Furthermore, 26% of people didn’t know that they could opt to take a lump sum payment from their pension fund when they came to retire; with one in six (15%) over 55s not being aware of this as a potential method of clearing any outstanding debts.
Surprisingly, more than half (65%) of those aged 45 and over were unsure about exactly what an annuity was. With retirement looming for these Brits, many appear to be burying their heads in the sand rather than preparing for their future.
When people retire, they need to turn their pension savings into a regular income. To do this they can buy an annuity, which guarantees you an income for the rest of your life. Typically the more money a saver can invest in an annuity, the larger the retirement income.
There are a number of ways to increase your retirement income. The simplest is to shop around for the best rates, rather than accepting the initial offer from your pension provider. Of those surveyed only 50% were aware that this was an option. Similarly there was a lack of understanding across all age groups of how health conditions and lifestyle choices could also result in increases in the income offered. By declaring medical conditions or that you are a smoker you could qualify for an enhanced annuity which could increase your retirement income by up to 40%2 yet only 41% of those questioned were aware of this.
Kate Rose, Head of Annuities at Confused.com says: “Retirement should be the time when we put our feet up and enjoy life after decades of work; yet so many of us are underprepared. It’s staggering that so many people due to retire in the next 10 years are unaware of their options.
“Buying an annuity is a once-in-a-lifetime purchase, and getting it right is essential. By shopping around, not only can you ensure you’re getting the right policy for you, but by opting to answer just a few extra questions regarding your health and lifestyle, you could achieve up to 40% more income per year.
“It’s really easy to compare annuities through comparison sites such as Confused.com. With a call centre on hand to answer any questions and guide our customers through the process, planning for retirement needn’t be something we avoid or put off.”