Most people look forward to the day when they can ‘down tools’ and enjoy a financially secure retirement.
However, two new pieces of research show that for many people retirement is just a dream, with some people forced to work well passed their planned retirement date.
Research from the CIPD (Chartered Institute of Personnel and Development) found that:
- 1 in 10 people are worried they will never be able to retire
- Two thirds of people have thought about working passed their State Pension age
- 31% of those people who plan to work past their State Pension age will do so in a part-time capacity, whilst 16% will be forced to take a full time job
It’s clear from the figures that many people are worried that their pension provision is insufficient to make ends meet in retirement. Indeed the report revealed that the average contribution to a workplace pension is 5% of pay; however, most employees believe they should be saving at least 9%, with 43% suggested a payment of at least 10% was necessary.
Worryingly though, 22% of people surveyed didn’t know how much they should be contributing.
Falling wages affect retirement plans
MGM Advantage, the specialist Annuity provider, has also warned that people could be forced to work well into retirement as a result of wages failing to keep pace with inflation since the financial crisis.
Figures from the Office for National Statistics (ONS), obtained my MGM Advantage, show that someone earning £27,000 in 2014 could have expected to be on £33,699 if their wages had kept pace with inflation.
Of course the failure of wages to keep pace with inflation has caused immediate financial hardship, but also affects income in retirement, as pension contributions will be lower.
MGM Advantage believes as a result of falling real terms wages pension pots of the average worker approaching retirement could be 13% lower; equivalent to an extra two years in work.
Andrew Tully, Pensions Technical Director, MGM Advantage, said: “The impact of falling real pay has hit workers hard. It is reducing their standard of living now, and will potentially reduce their standard of living in retirement too. This sleeping giant will only rear its ugly head when people come up to retirement, and means many may have to work for longer than planned, or re-evaluate expectations of their retirement.”
“This is not only an issue for people approaching retirement, but also something younger generations need to think about. For people who do have time on their side, the implications of lower pension contributions are relatively easy to address through making larger contributions now to make up the ‘shortfall’”
“An open and honest dialogue about the unintended consequences of falling real pay is vital to equip people with the right information to make informed choices and ensure their retirement plans are kept on track.” (Source: MGM Advantage)
Do you know when you will be able to retire?
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If you would like more information about the income you can expect from your pensions when you retire plus advice on any action you need to take now, our team of advisers are here to help.
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