Workers approaching retirement ‘with a blindfold on’
Two in five (40%) working adults aged 46-55 do not know the size of their pension pot making it difficult to plan for later life, according to Aviva.
The study among employees aged 22 to 65 – the age criteria currently used for automatic enrolment pension schemes – reveals nearly a third (31%) admit to not knowing how much they have saved in their pensions.
But this peaks at 40% for 46 to 55-year olds, compared to just 24% of those aged 22 to 30. This is especially concerning as pension freedom rules, which came into force in 2015, gave everyone 55 and over full access to their pension savings.
Alistair McQueen, head of savings and retirement at Aviva said: “Not knowing how much you have saved in your pension pot is like approaching retirement with a blindfold on.
“For those in their 40s and 50s, understanding retirement savings is especially critical. They can be accessed at age 55, at which point some big decisions might need to be made.
“Without knowing how much you have saved it’s difficult to put a plan in place that could improve your retirement.”
The research also shows half of workers believe they need to be saving more, with 40% of those aged 56 to 65 agreeing they need to do so. However, a similar proportion – 38% – say they are saving enough.
Workers aged 31 to 45 are the most keenly aware of the need to increase their savings with 52% admitting they should do so.
McQueen said: “Although almost half the population have admitted that they don’t think they are saving enough, the fact they are aware is clearly a positive. This needs to be acted upon, but it can be difficult when people are already under financial pressure.”
Top tips if you’re not sure how big your pension pot is:
- Understand your state pension: The state pension is most peoples’ biggest income in retirement. So, ask for a free state pension forecast to understand how much you will receive from the state in retirement, and when – https://www.gov.uk/check-state-pension
- Understand your own private pensions: More people than ever before are saving in a private pension. And you may have more than one. Get all your paperwork together to find out exactly how much you have saved so far.
- Find lost pensions: Over time you may have lost track of some private pension savings. There is a free government service to help – https://www.gov.uk/find-pension-contact-details
Three top tips for anyone looking to grow their pension pot:
Rule of thumb 1: 40-year rule
Aim to begin saving at least 40 years before your target retirement date.
Rule of thumb 2: 12.5% rule
Aim to save at least 12.5% of your monthly salary towards your retirement. This can include money from your employer too.
Rule of thumb 3: 10 times rule
Aim to have saved at least 10-times your annual salary by the time you reach retirement age.