Standard Life Aberdeen (SLA) has published a “Class of 2021” report, based on a survey of 2000 adults who plan to retire within 12 months.
SLA found that almost two in five (37%) of people who are close to retirement have accelerated retirement due to the coronavirus pandemic, but worryingly also identified that two thirds (66%) of 2021 retirees risk not having the pension savings to sustain their planned retirement income.
At Investment & Retirement Solutions we find most clients benefit hugely as they approach retirement from cashflow modelling: examining the assets available to produce income and capital to meet needs during retirement.
SLA’s research found that a 2021 retiree plans to spend, on average, £21,000 a year in retirement – almost £10,000 less than the average UK household income (£29,900).
Based on this £21,000 figure, a retiree would need savings of around £390,000 on top of their state pension for a 30-year retirement.
However, looking at their pension pots, and factoring in the money they’ll receive from their State Pension, analysis shows that two thirds (66%) are at risk of running out of money.
The average value of a Class of 2021 pension pot is £366,000 – but a third (33%) admitted to having less than £100,000 saved.
The research also found that more than a third (37%) of those planning to retire this year are worried about not having enough money to last throughout retirement.
Just two in five (39%) feel very confident that they’re financially ready to finish working this year, with a third (34%) of women feeling very confident versus two in five (43%) men.
Almost half (48%) are planning to reduce their usual spending to support themselves in retirement, while a quarter (27%) will work part-time to help financially. One in five (21%) are planning to sell their home or downsize to fund retirement.
However, there are clearly some apprehensions about retiring during a pandemic amongst this year’s retirees. More than half (51%) are worried about not being able to do things they planned, while two in five (43%) are concerned they won’t be able to see friends and family.
When it comes to their finances, SLA found that three in ten (29%) have concerns about their pension falling in volatile markets, and almost one in five (17%) have seen their income fall over the past year.