The gap between retirement dreams and savings


Some retirees could be facing a significant gap between their retirement dream and reality, research from Aviva suggests. While workers are making big plans for the next chapter of their life, some aren’t saving enough now to turn them into a reality. It’s a gap that could lead to disappointment in later years.

When thinking about retirement, people often have ambitious plans. After decades of being restricted by work, employees hope to have more freedom to indulge their passions, from visiting new destinations to supporting the next generation. When asked what they’d like to do in retirement, people responded:

  • Travel (47%)
  • Take up a new hobby or continue old ones (29%)
  • Give financial help to children or grandchildren (21%)
  • Buy a holiday home (15%)
  • Move abroad (15%)
  • Start a business (10%)

Considering how you’d like to spend your retirement years is important to creating a fulfilling lifestyle that suits you. However, achieving your goals is likely linked to your income and financial security too. As a result, the two need to match up. But the research suggests this isn’t the case for all planning their retirement.

  • Just 17% believe they will have enough money in retirement to really enjoy themselves and turn dreams into a reality
  • 18% think they will have enough money to live well, but won’t have enough to do everything they would like
  • 31% anticipate having enough to get by but with little spare to spend on luxuries
  • Worryingly, 23% believe retirement will be a financial struggle
  • One in ten have not thought about how their dreams and finances compares

Unsurprisingly, saving for retirement becomes a greater financial priority as we get older. Just 19% of those aged 22-30 say it’s a priority, as they focus on building up an emergency fund, buying a home, and paying off debt. As we approach retirement, saving to fund life after work becomes a priority for more than half (54%). However, putting off engaging with pensions and other retirement provisions until later years could leave you with a shortfall that’s difficult to correct.

Alistair McQueen, Head of Savings and Retirement at Aviva, said: “The retirement dream may not be the retirement reality for many people.

“Travelling the world is clearly a goal for some people, but if you’re not prioritising saving for retirement, that dream trip may never come true. We know people are facing many financial pressures, which often make saving more difficult. But saving into a pension should be aspirational. We need to remind ourselves that we are putting aside money for a better life in the future.”

What should you do if you find a gap in your retirement savings?

With many people expecting to miss out on at least some of their retirement dreams, the first step to take is understanding your current situation. Knowing there is a gap between what you want to do in retirement and your finances, puts you in a position to make up the shortfall or alter plans as needed.

1. Start increasing pension contributions now

Where possible, start increasing your pension contributions now. As contributions typically benefit from tax relief, it can help to boost your savings quicker. Of course, the earlier you learn of a shortfall, the greater the impact you can have with this strategy.

Increasing other retirement provisions should be considered too. This could be money added to an ISA (Individual Savings Account) or an investment portfolio, although these do not receive the benefit of tax relief on contributions.

If you’re planning to retire soon, this may be an option that’s not viable for you. But there are other steps you can take.

2. Analyse where compromises could be made

The simplest solution is to reassess what you want to achieve in retirement with your current pension and strategy. Set out what your priorities are and the areas where you’re willing to compromise. It may mean you miss out on a few of the things you had planned, but gain a secure, comfortable lifestyle in return.

3. Look at ways to boost your retirement income

Retirement today is far more flexible than it once was. There is a range of opportunities for boosting your income. More retirees are choosing to continue to work in some form, such as on a consultancy basis or part-time. The Aviva research also indicated that one in ten is keen to try their hand at entrepreneurship too, potentially increasing income.

There are other ways to increase your level of income too, such as accessing property wealth, but this option isn’t one that’s right for everyone.

4. Speak to a financial adviser

Financial planning can be overwhelming. If you’re struggling to understand how your pensions can be made to suit you or what other options you have, a financial adviser can provide you with insight. A professional may be able to suggest options for closing the gap that you weren’t aware of or don’t understand, creating a bespoke financial and retirement plan.

If you’d like to discuss your pension and how it can be used to support your retirement dreams, please get in touch. We can help you understand what’s possible with your current retirement provisions and strategy, as well as how to effectively improve it.

Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.