Confusing news over pensions and retirement

Over the last week, we have seen a series of news articles on pension savings and living in retirement. At first glance the information is confusing and may even appear contradictory. Here is our take on what they really tell us.

The week started with what appeared to be upbeat news that pensioners were now better off than those working. There have been real increases in pension income because of private saving and increases to State Pension and many pensioners are supplementing their pension by continuing employment. The real issue here is the poor income for many workers, particularly for the millennial generation.

There were two articles published with a similar theme – the cut in income that most people face when they retire. The size of the cuts differed from a quarter (24%) to a third and there were further differences depending on where in the country you live. This news shouldn’t come as a shock and really underlines the need to have a realistic plan to the changes and savings that can be made in retirement.

The final article looked at public perception, or misconception, of living costs, ranging from the cost of children to tax contributions by the top 1% of earners. It found that over-45s underestimated the cost of retirement by a quarter, equating to almost £100,000. In addition, most people underestimated the savings required to produce a given pension by over 50%; more significantly by under-35s. This lack of awareness, coupled with low earnings for the younger workers raises real issues about their expectations when they approach retirement.

On a positive note, the daffodils are starting to show! 

There is a growing call for financial education from an early age. Whilst giving advice we like to raise knowledge and understanding. If you want to discuss any aspect of your retirement planning, contact us at People and Business Independent Financial Advisers.