New Report Finds One in Three Brits Facing Hardship in Retirement

Retirement should be a period of relaxation and enjoyment after years of hard work. However, a recent report has revealed a concerning trend in the retirement landscape for Britons. The study conducted by Scottish Widows, a renowned pension provider, used survey data from 5,000 people. It sheds important light on the financial struggles that could be faced by a significant portion of the population during their retirement years. The findings underscore the importance of planning for retirement and taking proactive steps to ensure a comfortable and secure future.

Retirement in the United Kingdom has undergone significant changes in recent years. The transition from defined benefit pensions to defined contribution schemes has shifted the responsibility of retirement planning from employers to individuals. With increased life expectancy and the rising cost of living, it is crucial for individuals to plan and save for their retirement to maintain their desired standard of living.

Key Findings of the Report

The Scottish Widows report highlights several key findings that emphasize the challenges facing retirees in the UK:

One in three facing hardship: The report reveals that approximately one in three Britons will face financial hardship during their retirement. This means that a significant portion of the population may struggle to make ends meet and maintain their desired lifestyle.

Typical retirement income targets: The report reveals that single people may require an annual income of £12,800 a year to afford a ‘minimum’ standard of living in retirement. This rises to £23,300 a year for a ‘moderate’ lifestyle and £37,300 a year for a ‘comfortable’ standard of living. For a couple, these figures are £19,900, £34,000 and £54,500 respectively.

Inadequate savings: The study reveals a concerning lack of retirement savings among the population. It suggests that many individuals have not saved enough to sustain themselves financially in retirement, leading to potential poverty and financial difficulties. Just 36% of people surveyed were on track for a ‘comfortable’ retirement lifestyle. 11% are heading for a ‘moderate’ lifestyle in their older age, 18% for a ‘minimum’ lifestyle and 35% (just over a third) were unlikely to even meet this minimum level.

Gender & ethnicity disparities: The report highlights a gender disparity in retirement savings, with women generally having smaller pension pots than men. This inequality is attributed to several factors, including the gender pay gap and career breaks for caregiving responsibilities. There are also significant ethnic disparities with those from Indian communities on track for the highest retirement income, well ahead of the averages from the white British, white non-British, Black and Pakistani communities.

Low levels of financial education: The study suggests that many individuals lack the necessary financial knowledge and understanding to make informed decisions about their retirement planning. This lack of awareness contributes to inadequate savings and financial insecurity during retirement.

Sources of Expected Retirement Income

There are a number of ways to fund retirement. The survey shows that the State Pension is projected to make up most of the retirement income for at least half of the population. For those in the higher projected income categories, private pensions are likely to make up the majority of their retirement income. Some people expect to use inheritance in retirement, but it does not tend to be a key source of income.

The Importance of Planning for Retirement

The findings of the report reinforce the critical importance of planning for retirement. Failing to prepare adequately can lead to financial hardship, limited choices, and an inability to enjoy the golden years. Here’s why retirement planning matters:

Maintaining lifestyle: Retirement planning ensures that individuals can maintain their desired lifestyle even after they stop working. It allows for financial security, covering essential expenses and leisure activities.

Rising health and social care costs: Healthcare and social care expenses tend to increase with age. Planning for retirement helps individuals allocate funds for potential medical costs, ensuring access to quality healthcare without undue financial strain.

Longevity and inflation: People are living longer, and the cost of living continues to rise. Planning for retirement takes into account these factors, allowing individuals to have sufficient funds to support themselves throughout their extended retirement years.

Steps to Ensure a Comfortable Retirement

To ensure a comfortable and fulfilling retirement, individuals should take the following steps:

Start early: The earlier individuals begin saving for retirement, the better. Compounding interest over time can significantly boost retirement funds.

Assess savings and investment goals: Calculate your desired retirement income and evaluate your current contributions to determine any gaps. Set realistic goals and adjust saving strategies accordingly.

Seek professional advice: Consulting a financial planner can provide valuable insights and personalised guidance on retirement planning. They can help assess individual circumstances, recommend appropriate investment options, and ensure a tailored retirement strategy.

Regular reviews and adjustments: Retirement planning is not a one-time event. It is essential to review and adjust the retirement plan periodically to account for changing circumstances, market conditions, and personal goals.

In Summary

The Scottish Widows report serves as a wake-up call for Britons to take retirement planning seriously. With one in three individuals facing hardship during retirement, it is crucial to start saving early, set clear goals, and seek professional advice. By taking proactive steps and planning for retirement, individuals can better secure their financial future and enjoy a comfortable and fulfilling retirement.

If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.

Share this article