Lack of preparation could see huge pension shortfalls
The average UK pensioner will have a shortfall of more than £4,600 per year compared with their retirement income expectations.
Research from Axa Wealth has found that many people will be 20% worse off in retirement than they expect to be. Northern Ireland was found to be the only UK region where retirees may find themselves with more money than they expected to retire on.
The research indicates people across the UK will need on average £22,279.40 per year in order to live comfortably in retirement, but they are likely to be left disappointed. The East Midlands has the largest shortfall at £4,658.16, the South East and South West are not far behind with deficits of £4,070 and £3,935 respectively.
Nick Elphick, managing director of specialist products at Axa Wealth, said: "The findings demonstrate a nation that is, on the whole, chronically ill-prepared for retirement."
Figures from BlackRock suggest a lack of preparation is the key stumbling block; it found that a quarter of British 'mass affluent' aged between 25 and 75 have not started planning for retirement.
Speaking to those who had already retired the asset management company found many regret their lack of groundwork, with 40% saying they should have started their pension earlier, 25% believing they should have been more aggressive with their investments, and one in three wishing they had continued to work for longer.
BlackRock's research suggests pre-retirees are stuck between knowing they should be saving more and not being able to afford to (30%), with 18% even saying they think it is too late in life to start saving.
Alex Hoctor Duncan, head of EMEA retail at BlackRock, said: "Increased life expectancy, the slow extinction of generous pension arrangements, state privations and low yields from traditional 'safe haven' assets are just the beginning of the challenges facing investors.
"They need to adopt a more outcome oriented approach and accept that achieving their financial goals may involve taking some risk," he added.
Elphick added that future generations will need to save even more, with those in the regions with the largest shortfalls left with significant sums to make up once they reach retirement: "this will doubtlessly impact the lifestyle ambitions of many people", he commented.
This article was written for our sister website Money Observer
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.