New research has revealed many people in the UK haven’t even started thinking about saving for when they stop working.
Most have no idea how much they need to save to live a comfortable life in the future and worryingly, nearly half are not considering buying life insurance to protect their dependants from debt and provide for their financial needs.
The average Brit needs £370,000 to retire, based on £26,000 a year to live off. However, the survey results revealed some shock findings. Nearly half of respondents have no idea how much is in their pension pot, and over a quarter don’t have a pension.
Not only is the UK unprepared in their lack of pensions, and knowledge of how much their pension is worth, but on average, average, respondents estimated they needed £200,915 for their retirement – a 46 per cent underestimation. This huge disparity between how much Brits need to retire and how much they think they need to retire could lead to many having to work far longer than they had hoped.
There is a pension gender gap in the UK, with women found to both be less likely than men to have a pension, and also have a more unclear understanding of how much their pension was actually valued at. Only 1 in 5 female respondents knew how much their pension pot was worth, compared to 1 in 3 men.
At what age did you start considering saving for retirement – or preparing for the rest of your life? Whilst milennials were shown to be the least knowledgeable, there was also found to be a high lack of knowledge across all age groups. Milennials underestimate the amount they need for retirement by 58 per cent, and only 1 per cent of 18 to 24 year olds are saving for retirement.
However, it is not just the younger generations that are unprepared. Even over 55s underestimated the amount the need for retirement by over £145,000. Added to this, 66 per cent of over 55s do not have life insurance, which could leave dependants with hefty costs.
The study also identifies key regional differences with regard to savings and preparation for life after work.
Despite the high cost of living, Londoners are the biggest savers, with £14,611 saved on average. This is 55 per cent more than those from the West Midlands, who have saved the least on average, despite being most aware of their pension pot amount. Only 35 per cent of East Anglian respondents were aware of the actual amount in their pension pot.
Scottish and Northern Irish respondents are the most prepared for their futures, with the majority of respondents revealing that they have life insurance. Overall, respondents from the North of the UK underestimate the recommended pension pot amount by nearly 10 per cent more than those from the South.
A spokesperson at MoneySuperMarket, who mapped the consumer data, commented: “Brits face all sorts of calls on their money and it’s easy to see why the cost of everyday living can trump longer-term objectives such as saving for retirement – especially if you’re not fully aware of how much you’ll need in retirement. But anyone who can get into the savings habit gives themselves a better chance of building up the sort of pension kitty that’s needed to fund a comfortable lifestyle once they stop work.
“Anyone who has dependents should make life insurance an absolute priority, as the financial consequences of an early death can be catastrophic. Policies can be set up to pay off a mortgage and other debt, and also to provide money to meet the day-to-day financial needs of those left behind if the policyholder dies. As a result, it’s important that people take the time to look for a policy that’s best suited for their needs.”