New research by Standard Life Aberdeen has suggested that two-thirds of those retiring this year will run out of money before they die.
The firm surveyed 2,000 adults who are due to retire in the next 12 months, and found that, on average, they intended to spend around £21,000 per year in retirement. The firm believes that a private pension pot of £390,000 is necessary to sustain this level of expenditure over a 30-year period.
However, the study also discovered that the average size of the pension savings of its ‘Class of 2021’ retirees is £366,000. One-third have pension savings of £100,000 or less.
There were also significant regional differences in the results. In Yorkshire, the planned average spend amongst the Class of 2021 was as high as £25,465, and only 23% of retirees here would be likely to have sufficient money to sustain this.
In the South West of England, the planned average spend is somewhat lower, at £19,064, but Standard Life still believes that 54% of retirees in this region will use up their savings.
37% of all respondents admitted to being worried about having enough to manage in retirement. 48% indicate that they are likely to reduce their expenditure, while only 44% say they don’t plan to do any form of paid work (such as part-time employment) during their supposed ‘retirement’. 21% are planning to sell their home or downsize.
The survey also suggested that the Covid-19 situation has actually encouraged a number of people to retire. 37% of those due to retire in the next 12 months said that they had accelerated their plans due to the health emergency.
Standard Life Aberdeen retirement advice specialist John Tait said:
“Vast numbers of those retiring this year risk running out of money in their retirement. Retirement is a marathon, not a sprint, and many could be going into it without sufficient preparation or planning.
“Pension pots are without a doubt the most popular option for funding retirement, but it’s so important that retirees consider any other savings or assets they can use when deciding whether they can afford to retire or not.
“Understanding what money you have for your retirement and how to spend it wisely can be hard, but that’s where preparation and speaking to an expert can help. Circumstances or priorities may change, particularly if you’re retiring amidst a global pandemic, but it will be much easier to adapt a plan you already have, than if you were to have to start from scratch.”
Data from the Financial Conduct Authority shows that only 22% of consumers who don’t have a financial adviser are making use of the free Pension Wise guidance before accessing their retirement savings.