Nearly 40 per cent of adults are on track to enjoy a decent lifestyle in retirement while the rest are set to struggle, new research reveals.
A single person needs a minimum income of £20,800 per year, while a couple requires £30,600 to achieve financial security, according to an industry measure of retirement living standards.
Those figures include the state pension, which is currently worth around £9,300 per person if you qualify for the full flat rate.
Income plans: Well under half of adults are heading for a moderate or comfortable retirement
A new savings and resilience barometer launched by Hargreaves Lansdown looked at how likely people of different ages and on different incomes are to achieve a ‘moderate’ income threshold or above.
This found that a higher than average 45 per cent of people aged 40-56 have got their savings on track.
Hargreaves suggests this could be because they have reached an age when they are more likely to take retirement seriously, and because they could have benefited from generous final salary pensions before they were phased out in the private sector.
>>>What do minimum, moderate and comfortable retirement lifestyles look like? Find out below
Meanwhile, 36 per cent of people aged 25-40 are on course, but just 18 per cent of under-25s, although these are the generations most likely to benefit from auto-enrolment into work pensions.
Some 70 per cent of high earners, making £102,800-plus a year, are on target – meaning a sizeable cohort of affluent people could be leaving themselves short in old age.
The percentage of those making decent provision drops steeply to 47 per cent in the next highest income group of those earning £49,000-£102,800.
The new Hargreaves barometer is compiled in partnership with the forecasting firm Oxford Economics.
It is based on data from the Wealth and Asset survey by the Office for National Statistics – which draws its information from 10,000 households – plus other data from official sources.
Hargreaves says the barometer is structured around five pillars of financial behaviour – controlling your debts, protecting your family, saving for a rainy day, planning for later life and investing to make more of your money.
>>>Want to get your pension on track? Find a to do list below
Are you heading for a basic, moderate or comfortable retirement?
Source: Pensions and Lifetime Savings Association
In an attempt to show people what different levels of income in old age will mean to them in reality, the Pensions and Lifetime Savings Association created a measure which splits typical lifestyles into three groups.
The results indicate how big a shop you might be able to afford each week, where and how often you can take holidays every year, whether you will be able to run a car, and what you might be able to spend on clothes, shoes, presents and your home. Read more here and see below.
Source: Pensions and Lifetime Savings Association
‘Most people would like to think they will be able to afford a few luxuries here and there during their retirement years,’ says Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown.
‘This data shows we are way off track with less than 40 per cent of people on course to enjoy a moderate lifestyle in retirement.
‘Without action many people face living only the most basic standard of living in their later years.
‘It’s tempting to shelve the longer-term planning when there are pressing demands on our finances. However, we know the earlier you start contributing to your pension the better.
‘We need people to engage more and if possible, go over and above auto-enrolment minimums when it comes to contributions as over time this can add up and make a huge impact on your resilience in retirement.
‘Some employers are willing to pay more into your pensions if you do and so it’s worth asking if this is also available as it can really make a difference over the long term.’
Separate research published today shows the latest increase in the state pension age from 65 to 66 means significantly higher numbers of both men and women are carrying on working in later life.
But the Institute for Fiscal Studies, which carried out the study for the Centre for Ageing Better, found the effects were unequal.
An additional 7 per cent of men and 9 per cent of women are still working at age 65 overall, but the increase is 10 per cent and 13 per cent respectively among people living in the poorest areas of the UK.
Those who decide to delay retirement due to the rise in the state pension age to 66 are likely to be financially better off as a result, but they lose out on leisure time and other benefits of retirement, according to the IFS.
How to get your pension on track
If you are worried about your pension and whether you will have enough, read a full 10-step guide to sorting it out here.
To get started, investigate your existing pensions. Broadly speaking, you need to ask schemes the following:
– The current fund value
– The current transfer value – because there might be a penalty to move
– Whether the pension is in a final salary or defined contribution scheme
– If there are any guarantees – for instance, a guaranteed annuity rate – and if you would lose them if you moved the fund
– The pension projection at retirement age.
You can use a pension calculator to see if you have enough – find This is Money’s here.
You should add the forecast figures to what you anticipate getting in state pension, which is currently £179.60 a week or around £9,300 a year if you qualify for the full new rate.
Get a state pension forecast here.
If you are tempted to merge your old pensions, check out some tips on how to decide here.
If you have lost track of old pensions, the Government’s free tracing service is here.
Take care if you do an online search for the Pension Tracing Service as many companies using similar names will pop up in the results.
These will also offer to look for your pension, but try to charge or flog you other services, and could be fraudulent.
If you are in your 20s, we have a special pension guide here. Self-employed people can find out how to sort out their pensions here.
Women, who tend to miss out because they get lower pay and do unpaid caring work, can find out how to increase retirement savings here.
TOP SIPPS FOR DIY PENSION INVESTORS
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