The UK’s future pensioners look set to be cash-strapped as most Brits either have no idea or are wildly underestimating the size of pension pot needed for retirement. Over one in five adults (21%) believe they only need up to £50,000 for their pension pot, totalling approximately £3,333 per year, according to research by personal finance comparison site, finder.com.
This is dramatically below the recommended pension pot required for a comfortable retirement. As the current state pension sits at just £8,767.20 per year, the recommended pension pot is from £260,000 to £445,000**, depending on accommodation costs in retirement. Finder.com’s survey revealed that Brits on average believe that just £100,000 is enough to fund their retirement.
Millennials least prepared for high retirement costs
The younger generation is expected to have the highest cost of living in retirement than any previous generations due to the house price epidemic, as many millennials are expected to either still be paying a mortgage later in life or will be forking out on rental accommodation.
With this in mind, almost a third of millennials are approximately £395,000 short in their estimation of how much they will need. Almost a third (32 percent) of millennials surveyed believe up to £50,000 will give them enough pension to live comfortably, compared to a quarter (25 percent) of Generation X and 19 percent of baby boomers who believe the same.
Perhaps even more concerning is the number of those working towards retirement that don’t know how much they need for their pension pot. Almost half (48 percent) of baby boomers surveyed by finder.com admitted they don’t know what they need. For non-renters, the recommended pension pot is around £260,000 and worryingly, almost one in four (23 percent) of baby boomers may find themselves short by more than half of that, believing they only need up to £100,000 for their pension pot.