Am I Saving Enough for Retirement?

Are people saving enough for retirement?

The short answer is: no. By most metrics, many working adults in the UK aren’t saving enough for retirement.

According to the Resolution Foundation, “Around two-in-five working age people (13 million in total) are currently not saving enough to meet the minimum target for an adequate retirement income.”

In a separate survey by Investec Wealth & Investment, just under half (48%) of surveyed Britons were worried that their pension savings wouldn’t last the duration of their retirement.

According to the same survey, while a third of over-65s said they were worried about running out of money, 67% of under-45s and 70% of people aged between 45 and 54 expressed concerns about their pension savings.

Those worries are likely to be well-founded.

A recent article in the FT Adviser citing Standard Life’s Retirement Voice Report noted that the average surveyed adult had a shortfall of nearly £120,000 (£119,000) in retirement savings compared to their desired goal.

More than 6,000 adults were surveyed by Standard Life. On average, respondents said they hoped to save £250,000 into their pension pot by retirement. However, the average final sum was actually £131,000.

Perhaps unsurprisingly, of those surveyed, more than half regretted not saving earlier for retirement while more than two-fifths (42%) lamented not seeking pension advice from a financial adviser to guide their choices.

Saving enough for retirement: Practical steps

If these figures come as a shock, that’s by no means a bad thing. The first step towards taking positive action is to understand the current climate and, more importantly, your own situation to ensure you’re fully prepared.

With that in mind, here are three practical steps you can take to start saving enough for retirement:

1. Understanding your needs

First, think about your ideal retirement. “When do you see yourself calling it a day?” says Tim Stevenson, Financial Adviser at Hilltop Financial Planning.

“The current State Pension age in the UK is 66 (rising to 67 between 2026-2028), but you can choose to retire earlier if you have the means.

“What kind of lifestyle do you envision? Do you dream of travelling the world or spending more time on hobbies? Bear in mind that the earlier you retire and the more extravagant your plans, the more you’ll need to save.”

Retirement also means adjusting your expenses. “While you likely won’t have housing or work-related costs anymore, your healthcare needs might increase. This needs to be factored into your budget,” he adds.

2. Evaluating your current savings

It’s a good idea to evaluate your current situation. “Most UK employees will have a workplace pension set up by their employer,” Tim continues. “Check your payslips or contact HR to see how much you’re contributing.

“The national average pension contribution rate, accounting for employer and employee contributions, currently sits at 8%. But that’s unlikely to be enough for a comfortable retirement.”

Therefore, you might want to consider increasing your contributions to your workplace pension where possible.

“Many employers offer matching contributions, essentially giving you free money towards your retirement. So make sure you’re contributing enough to qualify for the full match,” Tim adds.

3. Working towards your goals

The earlier you start saving, the more time your money has to grow thanks to compound interest. Even small amounts saved early on can make a big difference to your retirement prospects in the long run.

“If you’re starting late, don’t despair,” says Tim. “Increasing your contributions and exploring additional saving options, like Self-Invested Personal Pensions (SIPPs), can help you bridge the gap.

“Living within your means is also crucial for maximising your savings potential. Budgeting and controlling your spending habits will free up more money to contribute towards your pension,” he adds.

Common retirement concerns

How long will my retirement savings last?

Predicting how long your retirement savings will last is a complex business. A combination of factors like total savings, life expectancy, spending habits, and investment returns all play a defining role.

While pension calculators and the 4% rule (withdrawing 4% of savings in year one and adjusting for inflation) can provide estimates, consulting a financial adviser is ultimately the best course of action.

Hilltop’s advisers can create a personalised plan based on your unique situation and suggest strategies like maximising contributions, appropriate investments, and planning for a potentially extended retirement.

What if I’m not saving enough for retirement?

Don’t panic! There are still steps you can take. Consider increasing your pension contributions, exploring additional saving options, and potentially delaying your retirement age if at all possible.

Again, financial advice can be an invaluable tool to help you manage your pension contributions effectively.

Is saving for retirement worth it?

Absolutely! Saving for retirement is an investment in your future freedom and well-being. Pensions are like turbo-charged savings accounts, offering tax breaks on contributions and letting you save more.

Your money benefits from compound interest, which could boost growth, especially if you start early. Plus, employer matching contributions effectively give you free money to boost your savings.

Some pension schemes even offer flexibility in contributions and investments. Ultimately, saving for retirement with a pension gives you peace of mind by potentially creating a strong foundation for your retirement.

Strategies to increase your pension fund value

Increasing the value of your pension fund requires a proactive approach. Here are some strategies to consider:

Regular reviews

Regularly review your pension plan with a finance professional and adjust as needed. This ensures your investments remain aligned with your retirement goals and risk tolerance.

Cost management

Be aware of fees associated with your pension plan. High fees can erode your fund’s value over time, especially if coupled with poor performance.

Some pension funds charge a platform fee, a management charge, specific fund fees, and even transactional fees to take your money out. All of which can make your pension an expensive plan.

Professional advice

Consider seeking pension advice from a financial adviser. Expert guidance and advice could help optimise your pension and investment strategy and maximise the growth of your pension in line with your risk tolerance.

“Investing in a well-diversified portfolio and regularly reviewing your pension plan could significantly enhance your retirement savings,” says Time. “It’s crucial to stay informed and seek professional advice and guidance to make the most of your pension investments,” he adds.

What is a realistic pension growth rate?

Understanding what a realistic pension growth rate looks like is essential for setting expectations. Actual growth rates vary based on investment performance, financial risk, provider management fees and market conditions.

However, a well-managed fund should realistically aim for a growth rate of between 5-7%.

Factors Influencing Pension Growth Rates

Several factors influence the growth rate of your pension fund, including the following:

Investment choices: The types of assets you invest in – such as stocks, bonds, or commercial property – significantly impact your fund’s growth rate and risk rating.

Economic conditions: Market conditions and economic cycles affect investment performance. During economic booms, growth rates tend to be higher, while recessions can lead to lower returns.

Fund management: How actively your pension fund is managed also plays a role. Actively managed funds may seek higher returns through strategic investment decisions but typically involve higher fees.

Take charge of your retirement savings

By taking charge of your retirement savings now, you can aim for a future filled with financial security and freedom. If you’re worried that you’re not saving enough for retirement, financial advice can help to allay your fears.

Take control of your financial future today by scheduling a consultation with a Hilltop financial adviser. Our pension advisers will work with you to craft a personalised strategy to help you achieve your retirement goals.

For retirement planning and pension advice, don’t hesitate to contact us on 0161 413 7051.

Additional resources

• MoneyHelper
• The Pensions and Lifetime Savings Association
• Retirement Living Standards
• GOV.UK