The study also unearths a new magic number for retirement income of 47% of pre-retirement income. On average, people are hoping for around half of their current salary when they retire, and those who stated they were satisfied with their income have achieved 47% of pre-retirement income.
Retirement Income Uncovered looks into the level and source of retirement income for people already retired from full time work, plus those over 50 approaching this crucial part of their financial lives. The report provides the first concise picture of current and changing sources of retirement income, changing attitudes to work in retirement and also levels of satisfaction and understanding of the different sources of retirement income.
Other key findings of the report are:
- We expect retirement to last for 21 years
- 41% of retirees receive less than £15,000 per year
- There is a £7,000 gap between men and women’s average income in retirement
The changing face of retirement
- Those approaching retirement are 25% less dependent on a final salary pension compared with retired people
- Those who have a retirement income goal are 63% more likely to be satisfied with their retirement income than those that do not
- Those who had a target income in mind before they retired have an additional £157,500 income over the course of an average retirement
- Retirees who used a financial adviser are more than twice as likely to have a target income in retirement – with an average income of £26,000
The emerging world of pension drawdown
- Using pension drawdown can reduce the pension pot required by 25% to generate the average income of £19,000
- Even as income drawdown hits the headlines only 17% claim to have a good level of understanding of it
In addition, the report examines how pensions may contribute less to retirement income in the future with other sources expected to make a greater contribution to those yet to retire – property downsizing contributes an average 2% to those currently retired, yet rises to a 15% expected contribution for those yet to retire.
Carlton Hood, Customer Director, Old Mutual Wealth says: “This survey shows that people approaching retirement are not the ‘bunnies in headlamps’ that many describe. Far from being frozen in fear, Our study uncovers a pragmatic Britain, that is adjusting expectations and facing up to the challenges of a retirement that people realistically expect to last for more than 20 years.
“Having a target in mind, and seeking financial advice makes a real and positive difference to how much you will have when you retire. More people yet to retire are setting goals and that will make them better off in retirement. People are satisfied if they achieve around half of their pre-retirement income when they retire, so perhaps the general rule of aiming for two-thirds is outdated.
“Retirement income is changing and people are preparing to use many different sources to fund this stage of their lives. The Retirement Income Uncovered report shows that people are adapting their behaviour accordingly and the picture of retirement income in the UK is not as bleak as some would like us to think.”
The complete report, including regional breakdowns of retirement expectations and the potentially positive impact of using income drawdown can be downloaded from www.oldmutualwealth.co.uk.
Notes to editors:
Old Mutual Wealth partnered with YouGov to conduct research into the attitudes and behaviours of those currently in retirement or approaching retirement.
The research was carried out via an online survey amongst YouGov’s consumer panel.
The sample consisted of 1,536 UK adults aged between the ages of 50 and 75.
The sample was split up into 5 brackets (50-54, 55-59, 60-64, 65-69 and 70+) with a target quota of 300 participants in the research from each age bracket.
YouGov invited a nationally representative sample to take part within each age bracket
Fieldwork was carried out between 4th July and 10th July 2014.