Retirement readiness ‘varies tremendously’ across UK
The readiness of households for retirement varies significantly across the UK, analysis has found.
Hargreaves Lansdown looked at Office for National Statistics (ONS) and Government data and found that households in the South East need to save the most over their working lifetime – £411 per month typically – to ensure they reach the same income as pensioners in their region.
At the other end of the spectrum, households in Wales need to put by around £207 per month to ensure parity with their retired neighbours, according to the estimates.
Nathan Long, senior analyst at Hargreaves Lansdown, said: “The retirement readiness of the UK differs tremendously by region.
“Whilst it might be tempting to ensure you are keeping up with the Joneses when you come to retirement, making a personal retirement to-do list is the best way to ensure you can leave work when and how you want to.
“Working out what you’ve got, when you want to stop work, where you’ll live in retirement and what you’ll need are important first steps in planning for life after work.”
Hargreaves Lansdown looked at the amount couples in each region potentially need to save each month over a 46-year working life to have the same income as pensioner households in their region.
The calculation made various assumptions, including that both people in the couple have the full state pension to fall back on and that their pension savings are turned into income at a rate of 4%.
It also assumed annual inflation and earnings growth of 2%, investment returns of 5% and charges of 0.75%.
Hargreaves Lansdown said the largest pension savings are squirrelled away by people in Scotland, where average pension wealth is £140,400.
At the other end of the scale, the smallest average savings are in the East Midlands at £87,400.
It found pensioners in London are hardest up after household spending, with only £6 left over per week. By contrast, pensioners in the North East have £109.
Here are the monthly pension savings needed by a couple to reach average regional pension incomes, according to calculations by Hargreaves Lansdown:
1. Wales £207
2. Northern Ireland £217
3. North East £244
4. West Midlands £250
5. Yorkshire and the Humber £256
6. North West £261
7. Scotland £276
8. East Midlands £282
9. London £300
10. South West £352
11. East of England £358
12. South East £411
Here are five tips from Hargreaves Lansdown for planning for life after work:
1. Work out what you have got.
Start by getting an up-to-date valuation from all your pensions. Track down all of your pensions, particularly from old employers you worked for a long time ago – as every pound counts. It is also worth getting a state pension projection, as this will form the bedrock of your retirement income.
2. Think about when and where you will retire.
Consider whether you want to finish work as soon as possible, work for as long as possible, or gradually reduce your working hours. You may even fancy a change of career. Moving to a new area could cut household costs.
3. Calculate how much you need to live on.
While your spending may stay around the same as before you retired, there may be one-off items to budget for like a new car or that once-in-a-lifetime holiday.
4. Look at boosting the amount you pay into a pension.
Even small sums can help, paying an extra £100 per month personally from the age of 50 can boost your pension by over £30,000 by the time you reach 65.
5. Stay on track.
Checking your savings once or twice a year can be enough to give you the confidence you are on track and make changes if you need to. Staying on track may be easier if you have consolidated your pensions, but before doing so check to ensure you are not giving up valuable guarantees or paying steep exit penalties. Your existing pension provider will be able to tell you if you are.