Unrealistic pension expectations expose millions to poverty

by Gill Montia

Story link: Unrealistic pension expectations expose millions to poverty

The Aegon group has published a report claiming that by today’s expectations, 22 million UK adults face a retirement in poverty.

Aegon, which is one of the world’s largest life insurance and pension companies, asserts that there is very large difference between the pension people expect to receive on retirement and what they will actually be entitled to.

In its survey, Aegon found that 53% of respondents would require an income of between £10,000 and £20,000 a year to live comfortably, if they retired today.

However, the value of the average pension pot is approximately £25,000 and this would produce an annuity of only £1,500 a year for a male age 65, and in good health.

Furthermore, only 12.6% of those surveyed believe that a stock market crash could severely affect their pension prospects.

Whereas, the recent volatility in the money markets caused the pension funds of FTSE 100 companies to move from a £12 billion surplus in July, to a reported deficit of £15 billion.

According to the survey, around 10 million adults in the UK have no long-term savings or pension and only 37% of adults believe they are saving enough now to provide for old age.

At the same time, over 35% of respondents believe they can realistically retire before the age of 65, despite the large numbers of people acknowledging they are not saving enough.

Assuming annual stock market growth of 7% per year, anyone saving for retirement in a personal pension scheme needs to be putting away 15% of earnings every year, for 40 years, to be able to retire with 50% of their salary.