Are you taking a gamble with your future retirement income?
Practically everyone looks forward to the day when they can give up work and enjoy a long and comfortable retirement. The ability to do that, of course, depends on sufficient retirement income from a pension – typically, a combination of the State Pension and a workplace or private pension scheme.
For all the dreams, however, it seems that many people are gambling on their future retirement somehow providing the financial wherewithal they need, according to research conducted by insurers Aviva and reported by the website Moneyfacts on the 16th of November.
Gambling with retirement
The research revealed a number of ways in which those approaching retirement seem to be deluding themselves about their future financial security and gambling on an income that simply materialises, without it being planned:
- millions of people in the over 50 age group, for example, have no financial plan in place for their retirement;
- 25% are pinning their hopes on downsizing, moving to a new, smaller home, and using the proceeds to fund their retirement – gambling on the housing market, in other words;
- 24% are banking on an inheritance to see them comfortably through their own retirement years;
- 22% hope that an “empty nest”, with fewer dependents, is going to reduce the household’s living costs and cushion the effects of a lower income during retirement; whilst
- an amazing 13% of the over 50s appear to be taking the biggest gamble of all by dreaming that their number in the National Lottery is going to come up!
Previous research by the Aviva group revealed a woeful ignorance on the part of young people about the way in which pensions work and recent changes to the rules.
Even though this group lacks confidence in the future of the State Pension, two-thirds of their number have the mistaken belief that they are going to receive it before the age at which they are currently likely to qualify.
But the young are not the only group to miss opportunities to build up their pension earnings. Aviva’s latest research suggests that peak earnings are reached by the majority of the employed when they are 51 years old and that this peak earning potential lasts for around five and a half years.
Instead of using at least part of those earnings to enhance the size of their pension pot, however, only 12% of workers say that they will do so – and only 14% of those who are within two years of retiring make such a decision.
Instead, a significant number of those interviewed said they would use the extra income on expenditure such as a home extension, a new kitchen, a new car, or ongoing, day to day living in order to enjoy themselves.
It doesn’t have to be like this, of course. Instead of leaving everything to chance and gambling away the prospect of a financially secure retirement, you might choose to talk to us here at Independent Pension Specialists Limited (IPSL) for professional and independent retirement planning advice.
This data is correct as at the time of writing.