Pension NIGHTMARE: Britons need to save £445K to live comfortably at retirement
BRITISH workers face a gloomy future as today’s workforce must build a “pension mountain” as high as £445,000 to live comfortably when they retire, a shocking report claims.
The worrying analysis estimates an average earner needs to have saved about £260,000 before their retirement to avoid falling below the living standard.
And the savings skyrocket to £445,000 if they don’t own a house, the report from pensions investment company Royal London show.
Millennials seems to be doomed to a life of renting, as the report expects around one in three retirees would still be paying rent even after retirement, giving £6,554 a year to private landlords.
Steve Webb, director of policy at Royal London, said: “We can no longer assume that we will be mortgage-free homeowners in retirement.
We can no longer assume that we will be mortgage-free homeowners in retirement
“For those unable to get on the property ladder during their working life, a large private rental bill needs to be factored in to retirement planning.”
The report called ‘Will we ever summit the pensions mountain?’ assumed people will stop working at 65, will use their pension pot to buy an annuity, and will have a full state pension to top up their savings.
The average sum saved into pension pots during a lifetime is around £30,000 to £40,000.
And the large majority of private sector workers have to rely on whatever amounts are saved into their company scheme, which is generally subjected to low interest rates.
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Falls in the annuity rates being offered generally are behind the fluctuations, Royal London said, reflecting the low interest environment as well as people living for longer.
Mr Webb said: “The pension mountain has grown by about 75% in real terms since 2002/03.
“This is partly because we are living longer and partly because interest rates are much lower, so a given pension pot generates a smaller income.”
Helen Morrissey, a personal finance specialist at Royal London, said: "This research is a reminder that when we save for retirement we are chasing a moving target.
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"If our retirement pot is going to support us through a longer retirement and in an era of lower interest rates, we are going to need to build a much bigger pot than in the past.
"More worrying still, we can no longer assume that we will be mortgage-free home owners in retirement.
"For those unable to get on the property ladder during their working life, a large private rental bill needs to be factored in to retirement planning."