Expectations higher than achievable

Retirement savers well short of reaching target

pension potsRetirement savers are expecting an average annual income of £13,100 from their private pension funds despite currently having just £59,000 in their fund.

In fact the average 0ver-45 retirement saver would need to have £267,000 in today’s money to earn that much from an annuity, according to over-55s provider Key Retirement.

And even if they factor in the state pension they will still be a long way short, Key warns. The current maximum basic state pension of £6,029 would still leave them needing a fund of more than £118,000 – double the £59,000 they currently have saved.

However, the study shows they have other substantial assets which could play a major role in delivering retirement income – the average over-45 has total assets including property, savings and investments worth nearly £219,000.

Key believes the pension freedoms changes will trigger a surge in interest in new approaches to accessing retirement wealth including equity release.

Dean Mirfin, group director at Key Retirement, said: “It is clear that savers have unrealistic expectations of how much their pension savings will deliver, but at the same time have built up substantial wealth in other assets including their homes.

“By looking at assets in the round, people can achieve the comfortable retirement they are looking for. Attitudes will shift as retirement savers recognise their property investment, if used wisely, can provide a major boost to their lifestyle in retirement.”

The figures show a substantial gap between male and female retirement savings – the average man has nearly £69,000 saved while women have £21,200. Their income expectations vary widely too – men are targeting £16,100 a year and women £9,350.

The findings show that a fifth (21%) expect to receive less than £10,000 per year from their pension pot and around a quarter (24%) are expecting more than that. Worryingly, over half (55%) said they didn’t know how much they will receive.

Key’s research shows almost half (49%) of working over-45s do not know much they have in assets and the average of just under £220,000 covers a wide range. Around one in 10 estimate they have less than £10,000 in assets while 11% have £400,000 or more.

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