Planning for retirement has never been more important

More than five million working age UK adults (14 per cent) believe they’ll never be able to afford to retire, with less than half the population (just 45 per cent) believing they will be able to stop working by 65, according to a retirement savings report from Prudential.

The stark findings highlight the continuing pensions crisis facing the UK’s population and the rapid demise of the ‘traditional retirement’.

Prudential is helping to find solutions to address this issue by establishing an independent panel of advisers, comprising IFAs and retirement income specialists, which will meet quarterly to discuss emerging retirement savings trends and challenges. The panel, which Prudential aims to have in place by July, will aim to find new ways to help UK adults better plan their retirement income and address the issues raised by this research report.

The Retirement Age?

In addition to the 14 per cent of UK adults who believe they will never be able to retire, 16 per cent said they were unsure when they would be able to afford to, 17 per cent hope to retire between the ages of 66 – 70 and 9 per cent don’t expect they will be able to afford to retire until after their 70th birthday.

Gary Shaughnessy, Managing Director Prudential Retail Life & Pensions, said “This report makes depressing reading and highlights how many people fear they will not be able to afford to retire or will have to suffer a significant change in lifestyle to fund their retirement.

“This new retirement reality means few people will be able to rely just on a pension to provide retirement income and for this reason we are forming an independent panel of experts to establish a new perspective on retirement planning, which recognises and promotes the fact that non-pension savings, investments and equity in property all play a vital role in enabling people to maintain their lifestyle in retirement.”

Confidence in pension schemes

The Prudential research report highlights just how little confidence UK adults have in the existing pensions system, with around two-thirds (64 per cent) of those polled expecting the State pension income to decrease in relative terms by the time they retire, and 40 per cent expecting it to get significantly worse.

Private and company pensions also gave little cause for comfort, with just 12 per cent of those polled expecting the income from them to get better by the time they retired, 40 per cent expecting them to get worse and 26 per cent believing they would remain at a similar level to today.

Utilising Savings & Investments

The research concludes that the majority of UK adults believe they will have to use other savings and investments to supplement pension income, with a staggering one in five (20 per cent) of UK adults saying they expect to have to sell their home to fund their retirement.

What are adults intending to utilise to supplement their retirement income?

41 per cent intend to use cash savings and ISAs
28 per cent are looking to use investments
17 per cent hoping to use an inheritance
7 per cent looking to use equity release schemes.

However, 13 per cent of Britons say they have no additional means of financing their retirement apart from their State or private pension, rising to 21 per cent for women.

Gary Shaughnessy concludes: “It’s important that people look wider than just their pension and review all the financial options available to them. There are a number of financial products available, such as equity release, ISAs, savings and investments that people can use to enhance their retirement income. Planning for retirement is paramount, not only for people to review what finances they have available but also to plan for the income they need and want and to understand what financial vehicle would best suit to meet this need.”