Will a state pension be enough?

Logic Wealth Planning pension advice

Have I saved enough, can I take a lump sum and is my retirement guaranteed are all good questions. Another one is will a state pension be enough?

Pensions and investments have featured prominently in the financial news feeds during 2020. The global coronavirus pandemic spooked markets and the value of investments linked to many pensions is a concern for people across the world.

Those investors have been urged to remain calm and to stay invested. Markets recover, and for those who have made retirement plans with a qualified and respected IFA (Independent Financial Adviser) they should have diverse portfolios that are more resilient to fluctuations.

However, there are many people in the UK who do not have savings for their retirements. In fact, according to Finder.com website around one third of people will rely on the state pension in later life.

Those people will have to fall back on the government pension or carry on working for many more years.

Can people rely on the state pension?

Understanding what you will need to enjoy a comfortable retirement is essential. It is something we should all consider.

That does not necessarily mean having lots of cash. It might mean having enough so that you can cover all basic costs, enjoy some luxuries, and even help your family.

In fact, it means having enough so that you have peace of mind and do not have to radically change the life you enjoyed when earning a steady income. 

Worryingly, the research commissioned by Finder.com reveals that over 40% of those questioned have no idea how much they will need during retirement.

£100,000 or maybe £500,000, or perhaps one million pounds – just how much is enough to retire on?

Over half of the survey respondents (55%) think that up to £100,000 will be enough to retire comfortably. Although any cash sum or investment will earn interest over time, a very rough calculation will show that such a sum will only last a few years.

The UK state pension (as of 2020) is currently £175.20 per week, approximately £9,100 per year.

Compare that to estimates by Royal London that range from £260,000 to £445,000 depending on personal circumstances.

Make pension plans now!

What people think is enough and whether they are on track to reach required savings targets varies across age groups.

From the Finder.com research we learn that 80% of Millennials (aged between 30 and 40) do not believe they will hit their pension targets to retire comfortably (the average prediction for this group is that £126,400 will be required).

For Generation X (aged between 40 and 60) around 75% do not think they will amass what they need to retire comfortably (the average prediction was that £188,300 will be required).

Finally, 59% of Baby Boomers (aged between 60 and 80 years old) think they will fall short of their collective average prediction of £211,800 to retire comfortably.

From the figures it is apparent that the older generation have a more realistic appreciation of how much is needed to live out retirement without being short of funds.

The message where pensions are concerned is that it is never too late to save. To get the best advice and to be realistic about how much you need it is recommended that you speak with an independent financial adviser.

They will always gauge your attitude to risk and look at what you hope to achieve in life. Only then should recommendations be made.

We have adapted to support our clients

It has been a challenging time for everyone, and pensions are the last thing on many people’s minds. However, if you do need to get good independent advice, we are here for you.

If you are currently self-employed, working as an employee, run your own business, or have accumulated pension pots with previous employers, you should seek professional advice.

Call us on 0808 1234 321 or email info@logic-wp.com to discuss any aspects of pensions and saving for your retirement.

Please be aware the value of investments or income from them can fall as well as rise. We are here to help you make informed decisions as you put important things in place for you and your family.

* Logic Wealth Planning provides independent financial advice in Manchester, Bury, Rochdale, Cheshire, and the surrounding area, but not limited to the region.