The cost of saving for a comfortable retirement could be at least £50 per day – more than six times current average savings levels in the South East - a new study has revealed.
A survey of over 12,000 pension savers shows that, on average, people believe an annual income of £23,457 is the minimum required to fund a comfortable retirement. This would require a funding pot of £469,140 by retirement.
But with the average saver questioned by financial and technology services firm True Potential expecting to retire at 60, a huge savings gap emerges.
A 35-year-old starting to save for a pension now would need to save £52 per day to reach the £23,457-a-year watermark by retirement. A 25-year-old, meanwhile, would need to find at least £37 worth of daily savings.
True Potential’s 18-month study of the UK’s Savings Gap – the difference between the income people want in retirement and the one they are on course to receive – reveals a chasm between aspiration and reality. Saving habits in the South East show that an average of just £8.52 per day is currently being put aside for retirement.
For someone starting their pension at 35 and retiring at 60, this would deliver an ultimate pension pot of just £77,745, a fraction of the £469,140 required for a comfortable retirement.
David Harrison, managing partner at True Potential, said: “Our research shows a clear gap between the retirement expectations of many savers and the likely reality with their current saving habits.
“This has not happened overnight. Instead it is the result of decades of poor or non-existent personal finance education and complicated products. This has been compounded by years of rock bottom interest rates that have discouraged people from saving at all.
“The keys to closing the Savings Gap are proper financial education, simpler products that are more attractive to savers and technology that allows people to save and invest when they want to.
“The pension freedoms that were introduced on April 6, have at long last given people more options and control than ever in terms of how they will fund their retirement. They are a step in the right direction but the new government must go even further in terms of education and simplifying financial services.”
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