Pensioners failing to budget for retirement life

UK pensioners are failing to budget for life in retirement despite the economic slowdown, with many spending considerably more in year one than in subsequent years, only to regret their splurge as the reality of living on a pension bites, according to new research conducted for Prudential.

The study found more than one in four (29 per cent) pensioners admit to spending more in their first year of retirement, on average splashing out £8,000 more than in subsequent years.

The research also found that 19 per cent of those who had spent more in the first year of retirement regretted doing so and only around a third (32 per cent) of retired UK adults said they set a retirement budget. More than a third (34 per cent) said they just played it by ear and a mere 17 per cent saw a financial adviser for advice on living on a pension.

Despite this, the study conducted among retired UK adults, found that 63 per cent said they felt they had planned their finances adequately before retiring.

Gary Shaughnessy, Prudential Managing Director Retail Life & Pensions, said: "It is quite worrying to see the lack of planning people undertake as they approach retirement and it's particularly surprising to see how few of today's pensioners sought financial advice. Seeing a financial adviser should be a baseline activity for everyone planning their retirement so that they structure their finances to maximise retirement income from all available sources, including pensions, savings and investments and equity in their homes, if necessary."

One of the key concerns is that people don't have any idea how long they will live in retirement, and therefore don't think about the longer term implications of over-spending when they first retire.

Gary Shaughnessy continued "It's easy to think that when you reach retirement your saving days are over - retirement is after all the main reason to save in the first place. However, analysis has shown that a 65 year old professional male can expect to live to 83 years old, while further research has shown that people over 50 years old can underestimate how long they live by up to six years. The key is to carefully manage your money throughout retirement, ensuring you don't give away or spend money that you may need in 20 years time."