Two thirds (66%) of people retiring in 2021 risk running out of money, a new report by Standard Life Aberdeen has revealed.
The Class of 2021 report found that those retiring this year plan to spend on average £21,000 a year in retirement, almost £10,000 less than the average UK household income.
However, looking at their pension pots, and factoring in the money they’ll receive from their State Pension, analysis shows that two thirds (66%) are at risk of running out of money. According to the research, the average pension pot among those planning to retire this year was £366,000, with a third admitting to having less than £100,000 saved.
More than a third (37%) said they were worried about not having enough money to last throughout retirement. Almost half (48%) of those surveyed plan to reduce their usual spending to support themselves in retirement, while a quarter (27%) will work part-time to boost their finances.
In contrast, just two in five (39%) feel very confident about being financially prepared to stop working this year. Men were found to be more confident (43%) compared to their female counterparts (34%).
John Tait, retirement advice specialist at Standard Life Aberdeen, said: “Vast numbers of those retiring this year risk running out of money in their retirement. Retirement is a marathon, not a sprint, and many could be going into it without sufficient preparation or planning.
“Pension pots are without a doubt the most popular option for funding retirement, but it’s so important that retirees consider any other savings or assets they can use when deciding whether they can afford to retire or not.”
Despite the concern around not having enough savings, Standard Life Aberdeen said its findings also showed that 37% of people have accelerated their planned retirement date in the past 12 months due to Covid-19. Lockdown affecting their retirement plans, health worries around the pandemic and job uncertainty were the three main reasons for speeding up their retirement. However, more than half (51%) are worried about not being able to do things they planned as a result of the pandemic, while two in five (43%) are concerned they won’t be able to see friends and family.
Ben Hampton, head of retirement advice at Standard Life, commented: “Longer life expectancy, volatile investment markets and ever-changing regulation can make planning and preparing for retirement feel confusing, not to mention the impact of the coronavirus pandemic on people’s immediate and longer-term financial priorities and plans.
“Whatever the plan, when it comes to making the decision to retire, most people find it understandably daunting. Even more so if you don’t feel prepared.”
Standard Life Aberdeen’s Class of report also interviewed 2020 retirees to see how they’re getting on. Despite Covid-19, seven in ten (70%) said they were happy with their decision to retire last year.
