Is the average Brit underestimating the amount required for retirement?
There’s more bad news for Brits in the midst of saving for retirement. New research has been conducted, revealing that a large portion of people in the UK haven’t even started thinking about saving for when they stop working.
A fair portion of the public is unsure of how much they’ll need to save in order to live a comfortable life in the future. Nearly half of this group hasn’t even considered opting for life insurance (which is alarming to say the least).
Why? Because insurance does ultimately protect dependents from debt and provide for financial requirements when they need it most.
If you were to consider the £26,000 needed every year to live off of during your retirement, the average Brit would need a total of £370,000 to retire with peace of mind.
However, survey results revealed that (shockingly) almost half of its respondents had no idea how much was in their pension pot, let alone how much they really needed. Even worse, over a quarter of them didn’t even have a pension to begin with.
Additionally, on average, respondents estimated that they would need about £200,915 for their retirement. That’s approx 46 per cent underestimation of the true figure required to survive old age.
The fact is there’s a huge disparity between how much Brits need for retirement and how much they think they need. This lack of understanding easily translates into more people having to work far longer than they hoped.
What is your pension’s worth?
The UK’s pension gender gap revealed that women were less likely to have a pension than men but women were also more unclear about their understanding of their pension situation.
Many female respondents weren’t sure about how much their pension was actually valued at, with only 1 in 5 of them knowing how much their pots were worth, compared to 1 in 3 men.
The younger generations were not spared either from the long reaching arm of underestimation. Studies showed that millennials in general were found to be the least knowledgeable, underestimating the amount needed for retirement by 58 per cent with only 1 per cent of 18 to 24-year-olds actually saving for retirement.
How old were you when you started thinking about your retirement? The younger generations weren’t the only ones that were unprepared. Interestingly enough, the over-55 age group underestimated their required retirement amount by more than £145,000. 66 per cent of this same age group also reported not having life insurance, which could lead to dependents incurring hefty costs in the long run.
The study had also segregated key regional differences with regard to savings, focusing on the preparation made for life after work.
The findings were rather surprising, with Londoners being the biggest savers despite the high cost of living. They had saved £14,611 on average, which was 55 per cent more than those from West Midlands who had saved the least on average. Strangely enough, West Midlands’ respondents appeared to be the most aware of their pension pot amounts. Only about 35 per cent of East Anglian respondents had knowledge about the actual amounts in their pension pots.
The Scottish and Northern Irish respondents were the ones most prepared for their futures, with a majority of them revealing that they had life insurance. Overall, respondents from the North of the UK underestimate the recommended pension pot amount by nearly 10 per cent more than those from the South.
A spokesperson at MoneySuperMarket, who mapped the consumer data, commented: “Brits face all sorts of calls on their money and it’s easy to see why the cost of everyday living can trump longer-term objectives such as saving for retirement – especially if you’re not fully aware of how much you’ll need in retirement. But anyone who can get into the savings habit gives themselves a better chance of building up the sort of pension kitty that’s needed to fund a comfortable lifestyle once they stop work.
“Anyone who has dependents must make life insurance an absolute priority, the financial consequences of an early death can be catastrophic. Policies can be set up to pay off a mortgage and other debt, and also to provide money to meet the day-to-day financial needs of those left behind if the policyholder dies.”
Get in touch today and make the choice to protect your loved ones.