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Are we sleep walking into retirement?

If someone offered you £10,000 to drive your car down the motorway blindfolded, would you do it?

By Mark Insley, Managing Director - Consulo Wealth

Hopefully not – and please don’t attempt this at home.

When it comes to pension saving, however, so many of us are doing just that: driving blind.

Over the past decade, research has pointed this out, time and again. Today, we’d like to share with you some latest thinking on the subject.

Just in the last month we learned that an alarming number of us – nearly half – aren’t aware we have a workplace pension, even though most of us do. The pension administrator EQ published a survey of over 2,000 UK adults, and found that less than half believed they had a pension. However, the Office for National Statistics (ONS) assures us that, thanks to auto-enrolment, nearly 90% of us now do.

Let’s face it, engaging with your own retirement planning is quite difficult if you aren’t even aware you’re doing it.

Further research by Unbiased reveals that of those 90% with a workplace or personal pension, a fifth have no idea how much they have saved so far, and a third have no idea how much they will need to live on, when they retire.

How much is enough?

They also found that generally, if we do have a desired retirement income in mind, we have no idea how much we’d need to achieve it. Many people who said they would like to have a £20,000 a year income from their pension savings believed that savings of £100,000 would be enough. In fact, that amount would provide just around £7,000 a year in income. Even adding on a full state pension as well, their total income, at £16,000 a year, would still fall far short of their target.

The reality is that, to achieve £20,000 a year, Unbiased say you would need the full state pension (now requiring 35 full years of National Insurance contributions), plus a pension pot of £170,000.

How do Consulo, as advisers, go about giving you a clearer picture?

Well, we deal with the three key questions that need to be answered, before you can plan for your comfortable and stress-free retirement.

The first question we have already hinted at above. We need to work out how much you’ll need.

To figure that out, you need to answer the second question: how long will your retirement be?

And only when you have pinned down the first two, can you proceed to the third (and most urgent) question: are you saving enough today, to achieve that comfortable lifestyle?

How long?

Predicting how long our retirement will be is crucial, as we are enjoying longer and healthier lives than our parents and grandparents did.

The average longevity in the UK in 2020 was 81.4 years. Compare that to the average longevity for a man 100 years ago, which was just 60.

The word ‘average’ is important here, however. Many more of us are living to be much older. Zippy new concepts such as ‘the wellderly’, because of our improved good health, and ‘the 100-year life’ are now common parlance in financial circles. Many more of us are living a full century.

We could, therefore, quite realistically be looking at a 30 or even a 40-year retirement. We need to plan ahead, to make sure our savings will last!

So what’s the current thinking on how much we will actually need?

The Pensions Commission recommends that we aim for a retirement income that is 50% to 80% of our working wage when we finally hang up our work boots. For that, they say saving 12% of our salary during our working lives is ‘saving adequately’.

Scottish Widows suggest we go even further, and say that lifelong savings of 15% of salary would be ‘a sensible goal for most people’.

So to sum up: what we see here is that many of us don’t know we have a workplace pension, many of us don’t know how much we have saved in it so far, and even if we did it wouldn’t be much help, as many of us don’t know how much we will need in our pension pot to retire comfortably.


Ancojada Limited trading as Ancojada Group is not authorised or regulated to provide financial advice.

All financial advice is provided by other regulated businesses.

This article does not constitute financial advice, and should not form the basis for financial decisions, which should be taken only in consultation with a qualified financial adviser.

The value of investments can fall as well as rise, and you may end up with less than you invested.

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