Almost half (41 per cent) of individuals admit they will not be able to fund a comfortable retirement, according to research from wealth manager Netwealth.
The survey, which gathered responses from 4,750 UK savers aged 40 and over, revealed that almost half (45 per cent) have not calculated their expected retirement costs, risking a financial shortfall.
Netwealth said this suggests a significant proportion of the population, who should be undertaking financial planning in the run-up to their retirement, are overlooking this crucial step.
Less than a fifth (19 per cent) expressed confidence in their retirement preparedness, and these consumers have no intention of setting aside extra savings for retirement.
Moreover, despite this small cohort thinking they have saved adequately, 51 per cent confess to failing to factor in the impact of inflation when making financial plans for the future.
Inflation is currently at 6.7 per cent and is unlikely to fall meaningfully until the start of 2024, Netwealth said.
Once adjusting for the impact of inflation, retirement funds may not be keeping pace with rising costs.
Charlotte Ransom, chief executive officer and founder of Netwealth, said: “Inflation is another hidden cost which individuals need to factor into their calculations to secure a comfortable future.
“There are some simple steps that people can take to be better prepared. Time is a great asset when it comes to saving - the sooner you begin making pension contributions, the longer they have to grow and compound.”
She explained that ensuring investments are diversified will further aid long term financial stability and returns.
“If you are already investing, it is vital that you understand the associated fees and whether these pots are working as hard as they can be to accumulate value – all-in fees are the single biggest detractor from final retirement pots and are within our control to avoid,” she said.
“The sooner you take these steps, the better prepared you will be as you head into retirement.”
Meanwhile, a further 15 per cent revealed they are not saving for retirement, even though they are aware that their current savings are insufficient.
These findings come at a time when retirement savings are having to stretch further as the average life expectancy reaches 81.
Ransom added: “The alarming reality that nearly half of respondents, who are aged 40 and over, haven’t even considered what they will need in retirement is of huge concern.
“In a challenging economic environment, the risk of not being able to afford the type of retirement that you expect is greater than ever.
“Without adequate planning, you may find yourself having to make difficult choices, such as cutting back on everyday expenses, compromising on healthcare, or foregoing luxuries you had hoped to enjoy.”
sonia.rach@ft.com
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