A new survey has revealed that one in five Britons don’t think they will ever be able to afford full retirement.
The “Future of Retirement” survey, carried out by HSBC, found that, of those who expect to stop full time work, 33% believe they will have to continue part time work. Among 25-34 year olds this figure was markedly higher at 40%.
The survey also found a worrying discrepancy between aspirations for retirement and reality; people expected their retirement to last for an average of 19 years, when in fact their average savings would only last for 7.
Despite the introduction of auto-enrolment in workplace pensions, things aren’t necessarily improving for those contributing. According to the report, the phasing out of final salary pension plans has meant that, in the future, pensions are likely to be determined by how much individuals contribute, investment returns and interest rates. Figures from Hargreaves Lansdown have shown that auto-enrolment contribution rates are unlikely to fund the retirement lifestyles that people expect.
Taking into account increasing life expectancies, the report urges young workers to start saving now to make sure that they have enough to live on when they eventually retire. Alarmingly, people are wildly underestimating the amount they need to save, and 58% of respondents said that they would prioritise saving for a holiday over saving for retirement - even though two of the most popular retirement aspirations were travel and frequent holidays.
The report concluded by urging people to be realistic about their retirement needs, stating that, although many people assume that their costs will go down when they retire, it is possible that the opposite could happen. For example nursing and care costs for elderly people can often run well into the thousands. The report also urged savers to diversify their sources of income, to avoid having “all their eggs in one basket”.
This latest report highlights the importance of sound financial planning, and the difficulties faced by future retirees as they attempt to fund retirement lifestyles that are looking increasingly unlikely.