Nearly HALF of retirees worried they will run out of money as many say they will rely on inheritance

Almost half of UK retirees fear they will eventually run out of money, with many relying on receiving an inheritance or downsizing to top up their pensions. 

A study by fund manager abrdn revealed that a quarter of retirees plan to top up their retirement fund with an inheritance from a family member or friend, while a third will downsize to a smaller home to free up some cash.

With an estimated 12.5 million people over the age of 65 in the UK, this suggests around three million retirees are relying on inheritance and more than four million retirees are planning to downsize to cover costs.

Savings stress: Almost half of UK retirees are worried they will eventually run out of money

More than half of retirees polled planned to reduce their cost of living in later years to pay for retirement, while three in ten said they would save money as they would no longer need to support their family.

More concerningly, two fifths of retirees surveyed said they had no plan regarding how much they should spend each year to ensure they did not run out of money.

Colin Dyer, client director at abrdn financial planning, said: ‘With retirement lasting 30 years or more for many, it’s vital that people are confident that they have the funds to support them.

‘You may have income from a number of different sources, so you need to think about how best to take it in retirement.

‘A financial advisor can assess your income streams, and explain any tax implications such as inheritance tax if money from a loved one is being relied on. 

‘Perhaps most importantly, they can explore how best to make your money last throughout your retirement years.’

Of those retirees who worry about running out of money, almost three in ten said they had considered returning to work part-time, whilst 8 per cent were tempted to go back full-time.

Almost a third said they had entered the lottery in the hope of winning big, while 6 per cent were planning to move in with their children.

How much do people need in retirement?

The amount you will need in retirement will depend on a multitude of variables, including the type of lifestyle you want, the state of your health and who else you live with.

The necessary income for a minimum, moderate and comfortable retirement have been calculated by the Pensions and Lifetime Savings Association.

It suggests annual amounts of £10,900, £20,800 and £33,600 a year respectively for a single person. These figures assume a full state pension worth £9,339 a year.

A minimum income would cover all your needs with a little left over for fun; a moderate one offers more financial security and flexibility; and a comfortable income would provide even more financial freedom and some luxuries.

Abrdn’s study asked current retirees to estimate their annual spend, revealing that the average monthly outgoings of a UK retiree amounted to £1,370, equating to £16,440 a year.

It also found that, on average, retirees planned to put aside 5 per cent of their retirement savings to cover later life care costs for them or their partner. 

This was compared to 14 per cent that they planned to put aside for holidays and travel, and 11 per cent on leisure activities or hobbies.

> Work out how much you can expect to receive in retirement using This is Money’s pension calculator  

On average, retirees that abrdn surveyed planned to put aside 11% of their income to spend on leisure activities or hobbies, and 14% to spend on going on holiday

On average, retirees that abrdn surveyed planned to put aside 11% of their income to spend on leisure activities or hobbies, and 14% to spend on going on holiday 

It found the average retiree even planned to spend more on things like gifts for friends and family than on the cost of care.

‘Being aware of how much you will need throughout retirement and how this could change as the years go on is vital,’ added Dyer.

‘We see a lot of our customers wanting to enjoy the earlier years in their retirement to the fullest – travelling the world, paying off their mortgage and treating themselves to their retirement wish list.

‘However, we also encourage them to keep in mind the potential longer-term costs that they could need to factor in down the line, including things like care and private medical bills.’

How can you improve your pension planning?

Getting a clear idea of how much you have in your pension is a good place to start.

If you have worked for several different employers during your lifetime then you may have several pensions which added together can boost your retirement plan. 

It may make sense to consolidate these pensions into one or two, so you have a clear view of your pension.

The Pensions Tracing Service can help you track down any pensions from previous employers that you may have lost track of.

Alternatively you can try This is Money’s retirement savings tool, which can help you estimate how much income you could expect to receive in your retirement.

Your pension provider may also be able to provide access to a pension calculator to help you with this.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown said: ‘It’s never too late to make a difference. If you find your pension falls some way short of your retirement income expectations, then you can contribute more.

‘A pension calculator can show the impact of making extra contributions over time.

‘Many employers also match their employees’ contributions up to a certain point. This can significantly boost your pension so check with your employer.

‘It’s not just about the pension – you may have other savings and investments such as ISAs that you can draw on in retirement. Be sure to take these into account when planning.’


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