Do you have unrealistic retirement expectations?


Performance evaluation paper with smileysPredicting your income in retirement is tricky at the best of times, even with the help of a financial adviser it can be fraught with difficulties.

The results of research conducted by Consumer Intelligence on behalf of Investec Wealth & Investment are therefore hardly surprising.

Unrealistic retirement expectations

The study found that higher earners, with incomes of over £50,000, expect their private pension to provide an income in retirement equivalent to 44% of their pre-retirement salary.

However, the research also showed that this expectation is unrealistic with the actual income in retirement likely to be just one-third of their pre-retirement income.

A quarter of those people who responded were even more unrealistic, expecting to see a drop in their income of less than 50% when they retire. Indeed, 7% of respondents expect their pension to provide an income equal to their annual salary.

Where are people saving for retirement?

The research also revealed the five most popular options chosen by higher earners to supplement their pensions for retirement:

  • Cash ISAs: 54%
  • Stocks and shares: 42%
  • Equity ISAs: 32%
  • Premium Bonds: 25%
  • Buy to Let property: 20%

The retirement problem

The survey, and particularly the over estimation of retirement income many people are making, confirms how hard it can be to accurately predict your likely retirement income.

There could be a number of reasons why this is happening. However, to avoid disappointment it is vital people plan carefully for their retirement throughout their working life and not leave the outcome to chance or start planning to late in their working life.

Commenting on the research and the unrealistic retirement expectations of many people, Chris Aitken, Head of Financial Planning, Investec Wealth and Investment, said: “The pensions landscape in the UK is a fast-evolving environment, and it is vital that people stay on top of the developments – and the opportunities – to maximise the income they get when they retire. It is more important than ever to develop a diversified financial plan as soon as possible to generate a suitable and sufficient income in retirement.”

Making up the shortfall

The research also looked at the ways people plan to make up any shortfall in their retirement income. The most popular options included:

  • Reducing expenditure in retirement: 35%
  • Downsize their home to release equity: 20%
  • Supplement their pension income from other savings and investments: 15%

An additional 15% of people took a more cavalier attitude saying they would maintain their spending levels and run the risk of running out of capital.

Plan to avoid disappointment

Generating a sufficient income in retirement to meet your income and capital needs takes careful planning, and probably some sacrifices during your working life.

The planning process starts by looking at your retirement goals then researching your existing provision to understand how far away you are from reaching those goals.

Only then can you consider the best ways of bridging any shortfall.

Once you have put a plan in place it is vital it is reviewed on a regular basis. Even the best plan can be blown off course by a whole range of factors, including stock market falls, inflation, job moves as well as changes to your personal circumstances and retirement goals.

We are here to help

Planning for your retirement is vitally important and shouldn’t be left to chance. We are of course here to help and are experienced in producing financial plans to ensure our clients have the best possible chance of meeting their retirement goals.

If you would like to discuss your retirement, call Sarah or Bev on 0115 933 8433 or email