Retirement prospects governed by lack of knowledge
by Gill Montia
Story link: Retirement prospects governed by lack of knowledge
New research from Abbey Savings indicates that over one-half of UK adults do not know how much money they need for their retirement.
Even amongst the over 65s, who are most likely already retired, 53% of those surveyed could not answer the question.
According to the research, 16% of respondents believed that they would be able to retire on £50,000 or less.
However, anyone buying an annuity for £50,000 would receive a maximum of £3,568 per year.
This equates to £304 a month and is below the annual GDP per capita in developing countries such as Algeria, Namibia and Botswana.
Twelve per cent of those surveyed believe they could retire on a sum of £100,000 or less.
While this could provide an annual income of £7,329, it would still be below the annual GDP per capita of Puerto Rico, Hungary and Barbados.
Abbey’s Head of Savings, Reza Attar-Zadeh, commented: “Clearly Brits are not saving enough for their retirement. This is of particular concern, with the move from final salary schemes to money purchase schemes, which means increasingly people need to take personal responsibility for saving for the future.”
The research revealed that women were less likely than men to know what funds they need for a comfortable retirement (63 % for women versus 44 % for men).
Meanwhile, This Is Money, the financial website, has recently reported that by the end of 2007 over 350,000 people will have exchanged their pension fund for a lifetime income.
Informed Choice, the wealth management specialist, is advising those who are weighing up the balance between annuities and pension funds to consider their own personal financial situation in depth.
Martin Bamford, financial adviser with Informed Choice, makes the point that there are advantages and disadvantages to both.
Mr Bamford believes: “The suitability of either approach is always going to depend on your personal situation and things like how much risk you’re prepared to take, how big your pension fund is, what other sources of income you’ve got and things like your health as well.”
In the case of an annuity, the amount of income that will be received during pensionable years is certain.
However, investors need to consider whether they may want to take out all their money in one sum, or over a period of years.