Retirement: Do you have enough?

16th October 2017
Retirement Do you have enough

How much do you need for retirement?

It’s not an easy question to answer, for a number of reasons. For one thing, it depends entirely on how you want to spend your retirement.

If you don’t know how much you need, new research from Retirement Advantage suggests that you probably don’t have enough.

So, how much are people falling short by? And more importantly, what can they do about it?


On average, over-50s say that they need a gross income of £1,435 per month to live on in retirement. However, a pension pot with the UK average of £70,000 combined with the full State Pension, would provide just £991 per month; a shortfall of £444.

Andrew Tully, The Pensions Technical Director at Retirement Advantage, commented: “There is a huge gap between the income people say they’re going to need in retirement and the amount they will actually get. Some people may be lucky enough to have a mix of savings, a final salary benefit and other pensions. But others may well be significantly adrift of what they say they need and in the process, we head towards creating a generation of pension castaways. Bridging this gap would require the average worker to save an extra £100,000 throughout their working lives. It’s crucial that Pensions Awareness Day helps raise these issues.”
The shortfall equates to £5,328 per year; nearly a third of the income most people stated they needed. If you’ve been saving diligently for your retirement, this news may come as a bit of a shock; but there are several things you can do about it.

So, without having to tighten the purse (or wallet) strings and living frugally, how can you ensure you have enough for retirement?

Financial Planning

A financial planner will understand your retirement objectives, consider the progress you’ve made to date and put a plan in place to bridge the shortfall.

That plan will then be checked on a regular basis to ensure it hasn’t been blown off track. Figures from Unbiased suggest those that take financial advice, save on average £98 more per month, creating an additional income of £3,654 per year, each and every year, for retirement.

Join a workplace pension

For employees that haven’t joined a workplace pension yet, they offer an effective way to boost your retirement savings. Auto enrolment, as the name suggests, means that most employees will be automatically enrolled into a workplace pension by February 2018. Currently, the criteria for auto enrolment is employees who:

  • Are over 22
  • Earn over £10,000
  • Have a contract to work in the UK

By joining a workplace pension, your employer and the Government (in the form of tax relief) will pay in, bridging your shortfall quicker.

Review existing pensions

For those that have personal pensions, reviewing their performance may highlight ways to save money and reduce charges. Reviewing a pension isn’t the most enjoyable way to spend a Sunday evening for anyone (and if it is, they’re probably not very fun at parties), which means that it’s an easy thing to put off.

A financial adviser or financial planner can review your pension and recommend whether an alternative will be appropriate.

Work beyond retirement age

Whilst this method may not be desirable (or possible) for some, there are benefits to working past retirement age beyond financial gain.

Working longer, or even part-time, can supplement your income in retirement, bridging the shortfall. Many over 50s are planning to work past retirement age for a number of reasons, such as:

  • Having a feeling of purpose
  • Avoiding boredom
  • Social interaction

Get a State Pension Forecast

The State Pension (and knowing how much it will provide) is often the foundation of a good retirement plan. To receive the full State Pension, 35 complete years of National Insurance Contributions (NICs) must be paid. Whilst most people build this up over a lifetime of working, it is possible to have gaps in your record.

These gaps can be filled by making voluntary contributions, which can bring you over the 35-year mark, ensuring that you receive the full State Pension.

Review outgoings

The minimum income you need in retirement is dictated by the bills that will continue even after you stop working. For most people, the single largest outgoing is their monthly mortgage payment. Therefore, taking steps to make sure it is repaid before retirement, is generally considered sensible.

Many lenders allow people to overpay their mortgage penalty-free, which will help them to settle the debt before they stop working. Whilst this won’t stop your utility bills from landing on the doormat every month, it may reduce the shortfall, and the need for such a large income.

Consider downsizing

Downsizing is often a divisive subject. On one hand, many people don’t need such a large home in retirement, and a smaller property could potentially mean reduced living costs. On the other hand, many can’t bear the thought of moving out of the family home.

Whatever your stance, downsizing is potentially a way of reducing your shortfall, and increasing your income in retirement.

Over 3.9 million over-55s plan to downsize to a cheaper property later in life, using the equity to provide an income. However, research from Prudential suggests that rising house prices and a shortage of smaller homes may make this a less effective method than most people assume.