Rising property prices may come to the financial rescue of hundreds of thousands of savers who don’t believe they have set aside enough money to fund their retirements.
The latest figures from life and pensions firm SunLife suggests only 9% of over 50s are confident they have enough retirement savings.
The firm’s research reveals that the average pension fund of a saver in their 50s is worth £146,666, while the company’s number crunchers have worked out the average 55 year old needs to stash £531 a month to pay for a moderately comfortable retirement.
But property prices could be an escape route for many, as owners in their 50s have seen equity in their homes increase by an average £133,000 which they could tap into through equity release.
The SunLife study asked 3,000 over 50s about their financial plans for retirement, and uncovered that one in five have no personal pension savings.
What a comfortable retirement costs
Figures from the Pensions and Lifetime Savings Association show a moderately comfortable retirement – – which covers basic living expenses and some luxuries, such as a European holiday once a year – would need an income of £20,200 a year.
With a state pension of £8,767 a year for an individual, another £11,433 is needed for a £20,200 a year income. To generate this amount, a pension pot of £282,000 is required.
According to SunLife, on average, savers in their 50s are currently £135,334 short.
So, assuming 3% growth a year, someone who is now 50 will need to save £357 a month into their pension to reach the £282,000 target if they want to retire at 65.
For someone who is currently 55 this rises to £531 and month while someone who is 59, would need to save £876 a month to retire at 65 on an income of £20,200 a year.
Out of reach target for many savers
To enjoy a more comfortable lifestyle, which would include more than one holiday, would need £33,000 a year.
Taking into account the state pension and the average pension pot of £146,666, someone aged 50 needs to save £1,669 a month to retire at 65 and receive an income of £33,000 a year.
Simon Stanney, a marketing director at SunLife said: “Just 9% of people in their 50s are confident they have enough in savings, investments and pensions to fund their retirement; a further 32% say they ‘hopefully’ have enough with a 36% saying they definitely don’t. A further 15% say they are not sure.
“Obviously the average over 50s pension pot is not yet mature, and many over 50s will reach their target by the time they retire, but for others, especially those nearing retirement age, the amount they need to save each month is quite substantial if they are to build up a big enough pot to retire comfortably.”