Pension pots are set to run dry after five years as people are only putting aside a quarter of the amount needed for a comfortable retirement, research from True Potential has revealed.
The year-long investigation into Britain’s savings and debt habits, involving more than 8,000 savers, found that to enjoy a comfortable retirement, savers would require £23,457 per year as an income from their savings and pension.
That target would need a total fund of £469,140 which savers could draw down five per cent over 20 years.
However, based on current savings levels, Brits are only on course to build a retirement fund worth £120,213 meaning that it could only support the desired annual income for five years before running out.
Over the last 12 months, savers have put aside £2,671.60 towards their pension pot. Over 45 years, that would build a total fund of £120,213 leaving savers with an annual income of just £6,011 per year throughout their retirement.
Of those surveyed, only four per cent of savers believe they could live comfortably on that amount of money.
Despite the fact that the figures do show the amount of money British savers have put aside for retirement has been steadily increasing over the last 12 months, this still would not be enough to achieve a comfortable retirement.
David Harrison, True Potential’s managing partner, said: “These figures show the size of the problem we face as a nation.
“Britain is sleepwalking towards an impoverished retirement and the reality for many in society today is that they will simply be unable ever to retire. That is a scary prospect and we should be in no doubt about the radical overhaul of financial education, regulation and culture that will be required to address this.
Mr Harrison argued that the savings gap were sown in non-existent personal finance education, overly-complicated products and a buy-now-pay-later culture that has become part of society. “We have also become a nation of cautious investors, preferring to save in cash, which simply means that inflation is destroying the power of those savings every day.
“Most people describe themselves as balanced or even cautious investors and who can blame them, after seven years of financial hardship brought on by excessive risk-taking? However this approach only means millions of people will never hit their retirement goals.
He added: “The answer is not to lower our aspirations for retirement but to raise our savings game now as a country; that means far better personal finance education and far simpler products that allow savers to assess risk properly and make the right decision for themselves.”