Retirement saving dips as expectations rise
The amount of income people want in retirement has increased by 17% in only six months. Yet over that period, the percentage of people actually saving enough to generate that sum has declined.
According to research conducted by pension provider Aegon, 47% of the approximately 4,100 adults surveyed do not make any regular contributions to a pension, and a further 27% contribute less than £100 per month. These findings are despite the fact that the state pension pays out only around £5,900 per year.
Less than a third of respondents were aware of how much the current state pension will pay.
Despite this, the average desired income in retirement was £41,000, up £6,000 from when Aegon first interviewed the respondents, prior to publishing the first version of this research six months ago.
People's perceived 'realistic likely income' rose by 50% in the period from £12,000 to £18,000. However, even the 'realistic' figures are estimates by the respondents, whose level of knowledge varies.
The number of people 'on track' to reach their desired income has fallen from an already meagre 7% in the first report to 6% in the more recent research.
Notably, Aegon's first Readiness Report was published before chancellor George Osborne's landscape-shaking Budget, in which he proposed a raft of new freedoms for the way retirees take an income.
David Macmillan, managing director of Aegon, says: "The chancellor radically changed the way people will be able to access their pension with his Budget announcements.
"It is possible, however, that the positive news has increased people's expectations about what they will receive in retirement, when in actual fact the main factor that determines their income in retirement will be how much they save each month."
Encouragingly, the amount people have saved in Isas has grown from an average of £8,200 in April - when the first report was published - to £12,700 more recently.
This article was written for our sister website Money Observer