Banking on inheritance

Despite many pensioners facing dire financial problems in their retirement years, twenty-somethings in the UK still have unrealistic ideas when it comes to planning for retirement, according to research by at and post retirement specialist, Tomorrow.

Kirsty Macpherson, Tomorrow spokesperson said: “Our research has revealed that, despite warnings from the Government over the pensions gap, and the plan to raise the state retirement age, the UK’s twenty-somethings are still not aware of the dangers of planning too late for their retirement.”

Nearer the time

The research, which compared young people’s attitudes towards retirement against the reality of those now facing it, reveals that four in ten people aged 18-24 (39%) say they plan to worry about how to fund their retirement ‘nearer the time’. One in five (20%) people in this age group say they are hoping to inherit money from family at some point as their main means of supporting themselves in retirement. Put together, this represents 59% of respondents who have no plans to save for retirement.

This relaxed approach to pension planning comes at a time when nearly a third (27% - equivalent to 4.5 million based on national population data) of over-55 year olds say their pension funds are so short that they are unlikely to be able to support themselves in retirement.

As a result, almost one in five over-55 year olds (18%) feel they will have to work part-time in retirement, with a quarter (25%) saying they will probably need to release equity from their homes during retirement as a means of financial support.

Planning too late

Lack of planning appears to be the consistent barrier to pension provision, with the majority (23%) of those aged over 55 revealing they began saving for their retirement between the ages of 41 and 50 – leaving barely any time to save properly.

Macpherson comments: “With the young not learning from the mistakes of the older generations and not making adequate preparations for their retirement, the current pensions crisis looks set too continue indefinitely.

“If younger generations were to give more consideration to their future needs they could easily avoid an uncomfortable retirement. It is also clear from the research that those reaching retirement would benefit from professional financial advice in order to maximise their income. There are often many options left open to people which are not considered, for example many people are not aware that they are able to increase the income they receive from an annuity because of bad health or lifestyle choices; equity release is also a viable option for many but is often not known to the retiree.”