MGM Advantage’s pensions technical director said the average income before retirement in the UK is £33,288, meaning most people should be aiming for an income of £21,970, or two thirds of this in retirement.
However, the reality is that the current average income in retirement is £16,016.
This means the average pensioner is facing an yearly income shortfall of £5,954 and to make up this amount, people would require an additional pension savings of £100,000.
Mr Tully said huge numbers of people could be left even more out of pocket. He said: “These figures show the true scale of the problem facing people approaching retirement. The challenge becomes even scarier if want your retirement income to keep pace with the cost of living and provide for your spouse.
“There are options for people who might have left saving for retirement too late, such as delaying retirement, continuing to work part-time, using equity release or even downsizing their homes.”
Mr Tully said the recent changes brought about by the Budget potentially provided more choice for people looking to generate a retirement income, but warned that clients still need “a sizeable pension pot” or other savings to draw on to provide a sustainable income.
Graham Pratley, investment specialist at Berkshire-based The Wealth Management Partnership, said: “I think that’s a huge underestimate for annual shortfalls, certainly in the south east of England where I see clients it will be much more severe than that in most cases.
“At the point of retirement, there isn’t an awful lot people can do to boost that income either. They have to look at downsizing or releasing equity. Otherwise they need to delay retiring or potentially look at a riskier investment, but that is not really advisable so close to retirement. The last thing they will be forced to do is adjust their standard of living.”
Average income before retirement
Aiming for 2/3rds salary in retirement
Current average income in retirement