People in the Southeast and women in particular will find retirement a struggle, according to the results of research published by JP Morgan INVEST.
The financial education provider’s “Pensions Map” of the UK suggests there is a two-thirds chance of poor pensions prospects in the Southeast of the UK, while three-quarters of all women in all regions face tough times.
The line between comfort and hardship has been defined by the map makers as being a pension of 40% or less of final salary weighed against the basic cost of living (as determined by the Expenditure and Food Survey published by the Office for National Statistics and the Department for the Environment, Food and Rural Affairs)
Betweeen 59% of all workers in the Northeast and 67% in Eastern England face hardship in retirement, the research suggests. These figures hide major gender differences, however, with women set to be most severely caned by poverty.
Some 40% of the women surveyed said they would rely on their partners’ pension pots as their main source of income in retirement, against just 19% of men stating the same. Older women are hardest hit: a whopping 93% of women aged 55-59 face a difficult retirement the research suggests, against 57% of women aged 25-34.
Overall, just 14% of all pension savers can look forward to a “comfortable” retirement – defined as income at least £12,500 above the basic cost of living - generally because most UK workers simply do not know how much they need to save.
The Pension Map suggests two-thirds of all workers still believe they will get a pension equal to at least 40% of final salary – say, about £16,000 for a person retiring on a salary of £40,000.
But more than half, 59%, of the 1,005 people surveyed by Opinion Research Business on behalf of JPMorgan, also said they had no idea how much they needed to save to secure an income of £25,000. Furthermore, about one-in-six, or 17% of those questioned believed a pension pot of £50,000 would be enough to get such an amount of retirement income against the reality of closer to £340,000 required today, and probably up to £700,000 to match expected future income increases over time (based on a 60-year-old non-smoker with a single life annuity at a 3% escalation).
David Cassidy, chief executive of JPMorgan INVEST, said: “In spite of the widespread pensions panic flooding UK headlines, the reality is that most workers still don’t understand the reality of the situation for them personally.”
“There is an urgent need to educate the workforce on how they should plan and save for a better standard of retirement. One of the best environments to do this is within the workplace itself.”
The research has found people are considering multiple ways of boosting their income in retirement. Among the youngest, the 18-24 age group, up to a quarter expec an inheritance windfall to help support their financial futures. About one-in-five, or 22% across all age groups expect to be able to downsize their properties to help fund retirement. And some 28% say they are still relying on state benefits for their future financial security.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Jonathan Boyd on 020 7484 9769 or email [email protected].IFAonline
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