Older homeowners in Yorkshire and the Humber are anticipating they’ll need an annual retirement income of £43,687 - a sum 44 per cent higher than the average income of a full time UK employee and a threefold increase from today’s average of £15,964.
This ambitious expectation is leaving a potential shortfall of £27,723 a year.
A new report published today by the Equity Release Council and Key – The pension / property paradox: moving beyond tunnel vision in retirement planning – shows that pension pressures are set to rise as many people access their savings early while generous final salary pensions are expected to be extinct for most people by 2050.
The main challenges comes from rising living costs, people who are prioritising mortgage repayments over pension savings, supporting financial dependents and earning less money so unable to afford to save more.
Not only are these factors impacting on pension contributions, but they are prompting the early erosion of savings pots.
One in six homeowners aged 55 and over, who are yet to retire have, or plan to, dip into their pension savings early.
This reality gap among homeowners aged 55+ comes at a time when pension income growth has stalled, increasing by just £7 a week over the last decade, and savings pressures are escalating across the UK, which is already home to western Europe’s largest increase in pensioner poverty since 1986.
Yorkshire and the Humber is home to the greatest reality gap, almost £10,000 more than the national average of £17,723. In comparison, older homeowners in the West Midlands are potentially facing a retirement shortfall of £12,617.
David Burrowes, Chairman of the Equity Release Council, comments: “With the UK’s population ageing rapidly, the scale of this issue is only set to become greater. An increasing number of consumers must make their pensions savings last over longer retirements with property wealth fast emerging as a viable solution to help meet this funding challenge.
“Our report emphasises the pension pressures faced by many across the UK and calls for property wealth to be better considered and integrated into the advice process. A single-product solution to retirement planning is no longer fit for purpose. We must break down the silos that create tunnel vision when it comes to later life financial planning.”
Will Hale, Chief Executive Officer of Key, comments: “Today’s report shines an interesting spotlight on an issue that the vast majority of us will face at some point in our lives. How do we juggle our financial responsibilities as we age in such a way that allows us to increase our pension contributions and achieve goals such as paying off our mortgages? Sadly, there is no simple answer to this particular question – especially with the slow death of final salary schemes but an increase in longevity.
“However, to me this report suggests that we should be asking an entirely different question -how can we use all our assets to help us achieve our wants and needs in later life? While even the boost provided by using residential property, investment and savings as well as pensions might not help everyone achieve a retirement income of over £35,000 – which is higher than the average UK salary – it will certainly help.
“Indeed, taking a holistic approach to retirement planning and ensuring access to good specialist advice will mean that more people are able to enjoy a comfortable retirement.”