New figures show only 30% of high earners are on track for a comfortable retirement.
New statistics from the HL Savings and Resilience Barometer show that less than a third (30%) are on track for a “comfortable” retirement. This compares to only 13% of households overall.
Even when it comes to achieving a “moderate” retirement income only 69% of higher income households are on track – better than the number for households overall (39%) but still short of many people’s expectations.
This means many higher income households may have to significantly reduce their expenditure in retirement from what they are used to in their working lives, carrying on working for longer or save more in the years between now and retirement.
Moderate and comfortable retirement incomes are taken from the PLSA’s Retirement Income standards. This puts a moderate standard of living at £23,300 for a single person and £34,000 for a couple per year. A comfortable retirement costs £37,300 for a single person and £54,500 for a couple.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown: “There’s a shock in store for higher earners. If you’ve been used to having plenty of money during your working life, then you could face a nasty surprise if you enter retirement and find your pension cannot sustain the lifestyle you’ve become accustomed to.
“The problem is compounded when we look at the percentage of high earning households on track for moderate retirement income. Just under seven in ten are on track for this which may seem high, but the likelihood is that a moderate income will nowhere near meet their needs.
“The PLSA’s moderate retirement income is pegged at £23,300 per year for a single person and £34,000 for a couple. If you’ve been used to lavish holidays a couple of times a year, then the two weeks in Europe afforded under this standard just isn’t going to cut it and you are going to need to make some difficult decisions on your spending.”
This version of the barometer has shown the financial resilience gap between higher and lower earners continuing to widen. Higher earners have seen their overall resilience improve in stark contrast to lower paid households. If these households are in a position where they can save more, then boosting contributions into a pension should be an important consideration, she says.
“Keeping track of how your pension planning is progressing is really important. You need to think about what you want from retirement and put a plan in place to help you get there. There are lots of calculators online that can help you model how much you are on track to get, and if you are falling behind you have the time to make up the gap by contributing more.”
HL’s advice for boosting your retirement incomeIncrease your contributions.
Many people fall into a set and forget pattern with their contributions but revisiting them and increasing them every time you get a pay increase or new job is a good way of getting more into your pension.
- Can your employer pay more?
Some employers will boost their contribution to your pension if you increase yours – this is known as an employer match. It’s well worth checking if your employer offers this as it can significantly improve your overall pension contribution.
2. Track down lost pensions.
Research from the Pensions Policy Institute estimated there is over £26bn of lost pension money washing around the system, with the average reclaimed pot around £9,000. If you think you’ve lost track of a pension, contact the Government’s Pension Tracing Service. details.
3. Consolidate
Having one overarching view of your pension can improve your retirement decision making and cut down on costs, time and administration. However, do check that you aren’t missing out on any valuable benefits such as guaranteed annuity rates by consolidating. Also check you aren’t incurring exit fees.
Make sure you know where you are with your retirement income
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