Personal Pension  

£5,000 shortfall faced in retirement: Friends Life

£5,000 shortfall faced in retirement: Friends Life

Based on current saving trends, Friends Life has calculated the average total amount of retirement income per person of £307 a week will not be sufficient once living and housing costs have been factored in.

The Friends Life UK Retirement Savings Map, a study conducted by YouGov of a sample of 7,092 people, showed that people will be facing a financial shortfall of £95.34 per week based on current savings levels.

However the research also showed some positive news elsewhere, with Brits planning to accumulate a ‘basket’ of products and sources of income to fund their retirement.

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It showed savers expect to use state, company and personal pensions, alongside instant savings accounts, stocks, shares and property.

Around 29 per cent plan to supplement their retirement income with a savings account and 18 per cent plan to use a cash Isa for securing additional funds during retirement.

However, when people actually begin retirement, generating an income from property falls down the list as retirees heavily rely instead on pensions and existing savings.

Last week, Miles Shipside, Rightmove’s director, said its agents are reporting a “high level of interest” from new landlords, who are typically first-time, retirement age, buy-to-let investors.

According to Friends Life, 17 per cent said they wanted to downsize or sell their property to unlock funds.

However, despite this, when it comes to those actually living in retirement, only 4 per cent have used funds from downsizing or selling their property.

Andy Briggs, group chief executive at Friends Life said: “It is hugely encouraging to discover that people are preparing for retirement by putting in place such a comprehensive ‘basket’ of retirement products.”

The study also showed that pensions remain the most important way of saving for the long term. Some 52 per cent of people plan to use a state pension while 39 per cent hold a company pension and 25 per cent a personal pension.

The focus is much higher for those already retired with 69 per cent of current retirees using a state pension and 53 per cent drawing from a company pension, and finally 26 per cent are using a personal pension.

Mr Briggs said: “It demonstrates that people are aware of the need to plan ahead and to understand the options available to them so they can work out how best to secure their future.

“However, while steps are being taken, our research shows there is still a gap in understanding how much income will be needed during retirement.

“On average, based on current savings behaviour, people are facing a financial shortfall of nearly £100 per week during retirement.

“This is why it is so important to take action early to be prepared so that whether you generate income from savings, property, investment or work, your future income can be as healthy as possible.”