Research findings from deVere Group lend weight to the report from the World Economic Forum (WEF) which calculated that the UK pension savings gap will rise from £6trillion to £25trillion by 2050.
The three primary reasons for the stark forecasts are increasing life expectancy, lower birth rates and, crucially, not enough being saved for retirement.
Nigel Green, founder and CEO of deVere Group, comments: “Nine out of 10 of all the new clients we have taken on as a firm in 2017 have unrealistic expectations of how much they will need in retirement.
“Typically, when we first meet new clients we discuss their personal financial circumstances and their long-term objectives, namely their retirement goals and aspirations, including at what age they would like to retire and how much they would need and/or like to have as income per year.
“Most people aim to retire at the default retirement age with a pension income of 75 per cent of their pre-retirement earnings, which is generally recommended by the pension industry.
“However, once we first do the sums with our new clients, it becomes alarmingly clear that the overwhelming majority are not yet on course to reach their goals. Indeed, nine out of 10 of all the new clients we have taken on as a firm in 2017 have had unrealistic expectations of how much they will need for retirement.”
He continues: “The ideal for most people is to retire in their mid 60s and enjoy a fulfilling, financially-secure retirement. But unless you have the discipline to set money aside whilst you’re working, it is, sadly, likely that you’ll need to quite drastically reconsider your retirement plans.
“Failure to save for your mature years whilst you’re earning will probably mean that you’ll need to work well into your 70s, or that you’ll have to considerably compromise your lifestyle when you retire – neither option is particularly appealing for most people.”
Earlier this year, another deVere Group survey found that a ‘live for today’ attitude means that as many as eight in 10 workers are not saving enough for their old age.
At the time, describing the findings as “very worrying indeed”, Nigel Green, observed: “Just 20 per cent of new clients were putting enough aside to realise their own long-term financial goals of retiring at an age they want and having enough money to last throughout their retirement.
“Too many people have a ‘live for today’ attitude, but what happens when ‘tomorrow’ does come and you want to retire? The ‘head in the sand’ mentality when it comes to saving for retirement is very concerning.
“We’re living longer, meaning the money we accumulate has to last longer and in the future, it’s unlikely that governments will be in a position to support older people like they have done for previous generations.
“Also, it is worth bearing in mind that there might not be the option available to work longer if necessary due to ill health, lack of career opportunities, or because you need to look after sick or elderly relatives.”
He added: “There needs to be a seismic shift in the savings culture otherwise many of today’s workers are going to reach retirement and find they have to significantly downgrade their lifestyle and/or continue working longer than they had expected.”
The deVere CEO concludes: “Whilst both the WEF’s recent predictions are alarming and our latest poll results in this regard are unquestionably troubling about there being a major shortfall in the amount of money people will have for retirement, there are always well-established and workable steps that people can take to remedy this. But people should act sooner rather than later where possible.”Last modified: June 15, 2017