Pre-retirees expect to need over £30,000 a year in retirement, leaving a gap of over £18,000 to fill every year with pensions and savings, new analysis by Broadstone has revealed.
According to the consultancy’s analysis of the Department for Work and Pensions recent ‘Planning and Preparing for Later Life 2024’ survey, people aged 40-75 who are yet to fully retire said they will need an income of £30,525 to live on in later life.
With the State Pension currently providing an income of £11,973 a year, this leaves a gap of £18,552 a year that needs to be filled.
Broadstone said that if all of this money was to be provided by purchasing an annuity at age 66, it would require a pension pot of around £330,000.
More than a quarter (27%) of people also said that they expected the State Pension to deliver over 70% of their retirement income with 15% expecting it to provide more than 90%, highlighting a disconnect between people’s expectations and the savings required to secure a desired retirement income.
David Brooks, head of policy at Broadstone, said: “In general, people are over-estimating what is an achievable and necessary income in retirement. While we don’t want to deter savers from targeting over £30,000 a year, that objective needs to be based on reality and the ability to balance needs both pre- and post-retirement.”
He added: “The purpose of the Pensions Commission will be to examine how they can enable people to save adequately so that they can contribute enough into their private pension or other savings vehicles.
“There are likely to be innovative mechanisms to achieve this beyond just ratcheting up mandatory employer and employee contributions such as the suggestion of pension side-car savings,” he added.
