New research from wealth manager Netwealth reveals that consumers approaching retirement are often underprepared.
According to the survey data, collating responses from 4,750 UK savers aged 40 and over, 41% admit it is unlikely they will have enough saved for a comfortable retirement, estimated at £430,000. A further 15% reveal that they are not saving for retirement, even though they are aware that their current savings are insufficient.
Nearly half (45%) admit they haven’t calculated the cost of retirement. This suggests that a significant proportion of the population who should be undertaking financial planning in the run-up to their retirement are overlooking this crucial step.
These findings come at a time when retirement savings are having to stretch further as the average life expectancy reaches 81.
Charlotte Ransom, CEO and Founder of Netwealth, comments: “The alarming reality that nearly half of respondents, who are aged 40 and over, haven’t even considered what they will need in retirement is of huge concern.
“In a challenging economic environment, the risk of not being able to afford the type of retirement that you expect is greater than ever. Without adequate planning, you may find yourself having to make difficult choices, such as cutting back on everyday expenses, compromising on healthcare, or foregoing luxuries you had hoped to enjoy.”
Fewer than a fifth (19%) express confidence in their retirement preparedness, and these consumers have no intention of setting aside extra savings for retirement. Moreover, despite this small cohort thinking they have saved adequately, 51% confess to failing to factor in the impact of inflation when making financial plans for the future.
Currently inflation is at 6.70% and is unlikely to fall meaningfully until the start of 2024. Once adjusting for the impact of inflation, retirement funds may not be keeping pace with rising costs.
Charlotte Ransom continues: “Inflation is another hidden cost which individuals need to factor into their calculations to secure a comfortable future.
“There are some simple steps that people can take to be better prepared. Time is a great asset when it comes to saving – the sooner you begin making pension contributions, the longer they have to grow and compound. Also ensuring your investments are diversified will further aid long term financial stability and returns.
“If you are already investing, it is vital that you understand the associated fees and whether these pots are working as hard as they can be to accumulate value – all-in fees are the single biggest detractor from final retirement pots and are within our control to avoid. The sooner you take these steps, the better prepared you will be as you head into retirement.”
Netwealth recently launched its Retirement Readiness Scorecard to support consumers to better understand how financially prepared they are for retirement and consider where they might need to do more. Developed by Netwealth’s team of financial planning experts, this financial tool is free to use and open for all to try.
The introduction of the Scorecard follows the launch of MyNetwealth, a free and provider agnostic financial planning tool, and is the latest phase in Netwealth’s rollout of technology to help raise awareness among consumers and drive greater confidence in financial planning.