Retirement experts have shone a light on the pension reality gap – the difference between the amount of money most people need when they give up work and the cash they have.
Older homeowners would like to have a retirement income of £35,196, according to research.
But that’s 16% more than the average income of a full-time worker and double the current average pension income of £17,212 a year.
And, says research by the Equity Release Council and advisers Key, the gap is likely to widen as one in eight retirement savers access their pension savings early while generous inflation-linked guaranteed work place pensions which were once the norm end by 2050.
The over 55s complain that they cannot afford to save more to narrow the gap because they are forking out on rising living costs (30%), paying mortgages instead of saving (24%), supporting family (22%) while earning less (24%).
The study reveals despite pensions news regularly hitting the headlines over the past 10 years, the amount people are saving has risen by just £7 a week since 2010.
From bad to worse
The reality gap varies for retirement savers living in different parts of the country.
The shortfall is most in Yorkshire and the Humber. Average gross pensions are £15,964 for a single pensioner here, but retirees anticipate needing £43,687 – a gap of £27,723 a year.
The narrowest gap is in the West Midlands, where the average gross pension is £17,004 a year compared with an expectation of £29,621 – a difference of £12,617.
David Burrowes, chairman of the Equity Release Council, said: “With the UK’s population ageing rapidly, the scale of this issue is only set to become greater. An increasing number of consumers must make their pensions savings last over longer retirements with property wealth fast emerging as a viable solution to help meet this funding challenge.
“Our report emphasises the pension pressures faced by many across the UK and calls for property wealth to be better considered and integrated into the advice process. A single-product solution to retirement planning is no longer fit for purpose. We must break down the silos that create tunnel vision when it comes to later life financial planning.”
The pension gap by region
|Region||Average Gross Annual Pension Income for a Single Retiree||Income Older Homeowners Expect to Need Per Year||Shortfall|
|Yorkshire and Humber||£15,964||£43,687||£27,723|
|East of England||£16,380||£33,746||£17,366|
Source: Equity Release Council/Key