Financial planning experts at Lamont Pridmore Asset and Wealth Management are urging local people across Cumbria to review their retirement savings following a new national study showing a widening gap between what people are saving and what they will need in later life.
New figures from Pensions UK show that the cost of achieving a minimum, moderate or comfortable retirement has risen in line with inflation, driven in part by higher food and socialising costs.
The findings underline how important it is for individuals to review their own circumstances regularly, especially as housing costs are excluded from standard measures and can add a further financial burden in retirement.
The annual Retirement Living Standards, calculated by the Centre for Research in Social Policy at Loughborough, predicts the costs associated with the different lifestyle types in retirement and the pension savings required to achieve them.
Income needed from retirement savings – 2 person households (per person)
| Lifestyle standard | Income needed before tax | State pension | Income needed from pension savings | Est. retirement pot needed |
| Moderate | £25,232 | £12,548 | £12,548 | £170-255k |
| Comfortable | £36,045 | £12,548 | £23,497 | £315-470k |
Income needed from retirement savings – 1 person household
| Lifestyle standard | Income needed before tax | State pension | Income needed from pension savings | Est. retirement pot needed |
| Moderate | £37,732 | £12,548 | £25,184 | £335-505k |
| Comfortable | £ 54,720 | £12,548 | £42,172 | £560-845k |
Pensions UK believe around 82% of today’s working population will reach the Minimum standard of living in retirement, just 23% will achieve a Moderate standard and only 9% will be Comfortably off.
A Moderate standard of living includes money for weekly groceries, an eating out allowance, the running of a 3-year-old small car (replaced every 7 years), a fortnight’s holiday in a Mediterranean 3-star destination, up to £1500 annually for clothing, and affordable weekly leisure activities plus small birthday and Christmas gifts for others.
It is important to note that the Retirement Living Standards do not include housing costs, which for many could be significant in retirement.
The situation is most pressing for those still decades away from retirement. Government figures suggest that people drawing their pension 25 years from now could be £800 worse off per year than those retiring today if current saving habits do not change.
The Government has responded by reviving the Turner Pension Commission, originally set up under the last Labour government in 2006, which introduced automatic enrolment into workplace pensions. The Commission’s interim report has already warned that people are not saving enough.
The issue is particularly acute for women. HMRC data shows that women have around half the pension savings of men, while research from investment platform AJ Bell found that the gap begins to open at age 28, when career changes, part-time work or caring responsibilities can start to affect contributions.
“These figures should be a wake-up call for people of all ages in Cumbria. The gap between what people expect to retire on and what they will actually have is growing year on year. Taking action now, even with modest increases to pension contributions, can make a real difference over time thanks to the impact of compounding,” said Graham Lamont, Chief Executive, Lamont Pridmore Asset and Wealth Management.
“We would encourage anyone who has not reviewed their pension recently to come and speak to us.”
Pensions UK has also stressed the role that workers, employers and government all have to play in encouraging greater retirement saving.
Pension providers are required to send annual statements estimating the income savings will provide in retirement, but Lamont Pridmore urges people not to wait for their next statement before seeking advice.
Lamont Pridmore Asset and Wealth Management provides independent financial advice to individuals and families across Cumbria, with a focus on retirement planning, investment management and long-term wealth strategies. To arrange a consultation, contact the team today.
