BLOG: Retirees rely on ‘basket’ of savings
The long-awaited pension freedoms offer savers control, accessibility and flexibility when it comes to accessing their retirement funds. What was previously a well-trodden road to annuities now splits into several different choices. Used wisely, these new options could allow people to enjoy a financially comfortable life in retirement. To enjoy these options to the full, however, planning should begin as early as possible in order to build up a fund which will support people through the entirety of their retirement. Our research has found that savers are actively engaging in how they make the most of their money, building up a ‘basket’ of goods to see them through.
Mix and match
Our Retirement Savings Map is based on a survey of 7,000 people across the UK. The research discovered different patterns of retirement savings, finding that people are planning to rely on a mix, ranging from property, inheritance, stocks and shares, cash ISAs and savings accounts, as well as private and state pensions. It’s really encouraging to see this, and shows people have started to look at their personal circumstances, to visualise how they want their retirement to be and to act accordingly.
Taking a more forensic look, we found that three in 10 (29 per cent) plan to supplement their retirement income with a savings account and nearly a fifth (18 per cent) want to use a savings account. Furthermore, one in five (17 per cent) said they wanted to downsize or sell their property or unlock funds. However, when it comes to those already retired, just 4 per cent have used funds from downsizing or selling their property.
Don’t end up short
While it is positive news that people are preparing for the future and building a healthy ‘basket’ of retirement savings and sources of income, our Retirement Savings Map continues to show that people will face a shortfall when it comes to retirement income versus the cost of living. Based on current saving trends, the average total amount of retirement income per person of £307 per week will not be sufficient once living and housing costs have been factored in and will leave people facing a financial shortfall of £95.34 per week.
Making Informed Decisions
As people take advantage of the new pension rules, it’s important to plan ahead and understand what sources of income are available to secure the best retirement. Everyone has different financial circumstances, so seeking the right advice will ensure the decisions made are made with the right knowledge and understanding behind them. Longer life expectancies should not get in the way of making the most out of this period; retirement should be a time to enjoy new activities rather than counting the pennies, so starting to prepare now will address any shortfall head on.