Almost half of those approaching retirement expect to supplement their pension income from other forms of savings, research from Fidelity suggests.
It claims thousands of workers approaching retirement are at risk of burning through their savings well before they die because they do not have a realistic retirement income plan.
The research - Improving Britain’s Retirement Income - reveals 70% of people aged over 55 who have not yet retired have no idea how much they might withdraw from their savings, while most of the remainder are set to dip into their savings at potentially unsustainable rates.
Simon Fraser, president of institutional business at Fidelity International, says, “People approaching retirement have yet to fully grasp the implications of increased longevity. Today’s 65 year old has a 50:50 chance of reaching 87 years old and a couple retiring at 65 face a one in six chance that one of them will live to be 100. People could find themselves in retirement for up to 35 years, almost as long as they spent in their working lives.
“This has huge implications for savings. People need to be much more informed about the rate at which they dip into their capital, otherwise they are in danger of burning through their savings well before they die. They then face the prospect of falling back solely on state and company pension benefits, often at a time when their expenses could be rising as a result of ill health.”
Fraser adds this issue is set to grow in importance as more people look to non-traditional sources of pension savings to supplement their income from state benefits and company pensions.
Fidelity’s research indicates 45% of people approaching retirement expect to supplement their state and company pension benefits with income from ISAs, mutual funds and property, with just under a third expecting it to account for over half of their total income.
Fraser says: “Sustaining a comfortable retirement is no easy feat. Our traditional pension sources are shrinking: state benefits are reducing in value and the government wants to see them come down as a proportion of overall pension income; companies are moving from final salary to money purchase schemes with less generous pension contributions. The next generation of retirees is already planning to rely quite heavily on non pension savings. But unless a lot more time goes into sensible retirement income planning it’s not hard to imagine a situation where many new retirees will have run out of savings.”
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 Matthew West on 020 7484 9893 or email [email protected].IFAonline
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