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FCA research note shows young face a 60% shortfall in their retirement provision compared to those about to retire

02/04/2019

If you are covering the research note from the FCA published today, which explores the accumulation of wealth in Britain and what this tells us about the nation’s preparedness for retirement, please see the following comment from Ian Browne, pensions expert at Quilter:

Ian Browne“The FCA research note exploring what the distribution of wealth tells us about the nation’s preparedness for retirement makes for some scary reading particularly for Britain’s younger generations.

“According to the paper, half of all 20 to 29-year-old have no retirement  resources, and of those aged 30 to 39, half have less than £30,000 saved. Now this is in part down to the fact that its analysis is of data from 2014 to 2016 so doesn’t capture the role of auto-enrolment, but worryingly even once that’s taken into account there works out to be a terrifying 60% shortfall in the amount of money millennials can expect when they enter retirement compared to those today who are just about to start enjoying their golden years.

“According to the paper the average individual aged 60-65, based on what they have accumulated to date, might expect to achieve a gross annual retirement income of around £14,200 to £17,000. Our recent calculations* for those in their mid-twenties relying solely on auto-enrolment make for a worrying comparison of what they might hope to receive. Our figures suggest that if a 25 year old on a current average annual UK salary of £28,700, remains in a similar role and is auto-enrolled until the age of 68, they might expect to receive a retirement income of around £5,600 per year in real terms. This works out to be a terrifying 60% shortfall in the amount of money millennials can expect when they enter retirement compared to those today who are just about to start enjoying their golden years.

“While naturally many are likely to see increases in their salary between those years and hence an increase in contributions, the projections still often turn out significantly less than generations previously and importantly what most would expect to spend during their retired lives. This kind of data should be a wakeup call to people that while changes such as the auto-enrolment minimum contributions for pensions going from 2% to 3% for employees are good they are still far from enough for later life. Government and the pensions industry need to boost engagement from a young age and hammer home that foregoing yet more of their salary is not only worth it, it is necessary.  

“Although this research offers nothing surprising to many, particularly those in the industry, it should serve as yet another warning that unless younger generations take retirement saving into their own hands they risk poverty in later life.”

*Calculated using the Money Advice Service pension calculator.

For more information contact

Alex Berry023 8072 626007741 151931alex.berry@quilter.com

Notes to Editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.4 billion in investments (as at 30 June 2019).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

The Quilter plc businesses are being re-branded as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Charles Derby Group (becoming Quilter Financial Advisers)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Wealth Solutions in 2020)
  • Old Mutual International (becoming Quilter International in 2020)

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This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.