Pre-retirees spend more time planning their holidays and redecorating their homes than planning their retirement.
According to new research from insurer LV=, people aged between 45 and 54 are spending a worryingly brief amount of time planning their retirement finances.
Despite the introduction of the pension freedoms in April 2015, which offer savers unrestricted access to their retirement savings from age 55, half of all people in this age group did not think about their retirement at all last year.
Those retirees that did turn their minds to their retirement plans only spent an average of three hours and 42 minutes on the subject. This compares to an average of five hours and 42 minutes spent planning their last holiday and five hours and six minutes on redecorating a room.
It comes as little surprise then that six out of 10 pre-retirees don’t how much they have saved in their pensions and just 12% say they understand the pension freedoms.
LV= says that if people spent more time engaging with their pensions they would be better placed to know whether they are saving enough.
According to the provider’s research, people think they will need an income of £1,360 a month when they retire, while the average saver in this age group has a pension fund worth £71,342. However, based on a retirement age of 65, savers would need a fund worth £158,000 and full eligibility for the state pension to achieve this income.
‘Check your pension pots annually’
As such LV= is calling on the Financial Conduct Authority and the Pensions Regulator to force providers to include standardised pension summaries in annual statements. These would include illustrative examples showing how much income their pot is likely to generate and how much they are likely to need when they retire to help them work out whether they are saving enough.
John Perks, managing director of retirement solutions at LV=, says: “Ten years away from retiring is really the last opportunity people have to make any significant changes to their savings that could allow them to live a more comfortable retirement. So it’s extremely worrying people spend longer thinking about a holiday, which might last one or two weeks, than retirement, which might last 30 or more years.
“We urge anyone approaching retirement to check their pension pots annually, and consider using a professional financial adviser to help them make a plan. From 2019, the Pensions Dashboard will be crucial in helping people better understand their financial situation by allowing people to view all their pensions in one place but this will still require consumers to log on to the system. We also want the regulators to make pension providers send examples of future monthly income to consumers annually so people are encouraged to plan more.”