In the week that saw a lottery win of £170 million, a survey also revealed that for a large part of the population, buying a lottery ticket is their only form of pension planning. Auto-enrolment has to a large extent changed things as workers now save through company schemes, but we’ve uncovered a few statistics which make for potentially worrying reading if you’re hoping for a happy retirement.
The average amount sitting in pension pots is £61,897. This will generate a yearly income of about £2,500. Add this to a full state pension and it doesn’t match the minimum wage.
One in 8 of all pension pots are over £250,000, which is the minimum most people are going to need. On average, we are not saving enough to create this size of pot anyway. Last year, the average amount paid into a pension was £2,700. Over a 30 year working lifetime, this will create £81,000, nowhere near the amount required.
Accessing your pension pot is relatively easy, and 25% can be taken out as a tax-free lump sum, which is obviously very attractive. But is this the best option? The rules are complex, and taking out a lump now may not always be the best option for you in the longer term. 48% of pension plans in 2018 were accessed without any financial advice. It is a bit of a minefield, and there are many sources of help and advice – perhaps the best starting point is the Pensions Advisory Service, a free and impartial government service.
After a lifetime of work, making sure you are able to afford a decent retirement is an important consideration – but one which we don’t tend to think about until it may be too late. On average, a male will live another 18.6 years after hitting 65, and a female another 20.9 years. Pension planning really should be about more than buying a lottery ticket.