The challenge facing today’s 18 to 40-year-olds to save enough for retirement is “quite frightening”, Fiona Tait has said.
The pensions specialist at Royal London added: “The primary purpose of a pension is to provide long-term income, and too few of the people we surveyed recognise their income may need to last over 20 years in retirement.”
Commenting on research carried out by Royal London, Ms Tait said the findings “outline some stark savings challenges facing today’s younger generations and how pensioner spending will change”.
The research showed that, for 18 to 40-year-olds, the median savings pot was £14,000, significantly below the amount needed.
The 30-page Royal London report, Pensions Through the Ages – Generation 2050 and Beyond, stated that most people under 40 were not saving sufficiently to meet the rising cost of life after retirement, which is expected to soar by nearly 150 per cent by 2050.
It showed that today’s 35-year-olds will need to have saved at least £666,000 by age 65 to secure the same standard of living on a pension.
The current average monthly expenditure of a pensioner today, who is not reliant on the state pension, is £1,084 a month. This is set to increase to £2,930 a month by 2050, an increase of 148 per cent.
On 1 October, during FTAdviser On Air, Ms Tait added that technology could help provide advice to people at a lower cost, while specialised information such as Pension Wise could provide a start for some people.
David Trenner, Ms Tait’s fellow panellist on FTAdviser On Air, and technical director for Scottish advisory firm Intelligent Pensions, said: “We have a number of tools on our website that can help people before they spend time with an adviser, which means they come with a better idea of what they need to achieve with their pension pot.”
Graham Tracey, IFA at Blackhouse Independent Financial Services, based in Lancashire said: “It’s really frightening when you look at the situation for people with private or DC pensions, rather than final salary pensions. The sooner they start saving the better, and I think we are going to see an increase of people retiring later and doing part time, less demanding work after they’ve retired from their main job.”