DIY Investor Magazine
/
2015 Issue
11
THE AGE: A MESSAGE FROM THOSE AHEAD OF US
One of the most notable indications that came out of
M&G Investments’ survey was the difference between
what people did and what they thought they should
have done. Breaking the responses down by age
particularly highlights this gap and suggests there are
some lessons pre-retired people can learn from those
who have been there and done that.
The average age the respondents started saving for
retirement was 27.5 years, four years later than the
average they gave when asked when they should have
started, although 55% did not start until they were
beyond 30.
The average age that respondents over 55 started
saving was 31.5 years, fully ten years after what they
considered the optimum start point; 25% of 18-24
year old’s thought 25.5 years was OK showing a
generational gap between youth and experience. 83%
of those over 55 thought that saving should begin
before age 30, yet only 38% had done so and whilst
88% of 45-54s thought that 45 was too late to start
saving for retirement, 18% had yet to do so.
15% of those aged over 55 said that they definitely had
not made enough provision for their retirement fuelling
concerns of a sizeable problem to come.
The message regarding State Pension provision
appears to have been received – only 16% of the under
24s expect this to be their primary source of income in
retirement compared with 36% of over 55s.
The survey also highlighted the shift toward private
pensions as the closure of so many Defined Benefit
(DB), or Final Salary schemes filters down; however this
highlights another issue as 67% of those in DB schemes
expect that to be their primary source of income in
retirement as opposed to just 47% in DC schemes.
The results of this survey give a very clear indication of
some of the root causes of the ‘income gap’ and their
identification is a useful first step toward addressing
some of the attitudinal and behavioural issues that are
currently seeing a large number of retirees undershoot
their expectations.
Working out how to make adequate financial provision
for retirement is one of the most important financial
decisions most of us will ever face. Retirement used
to be about annuities for most people, but growing
concerns that some of these products were offering
poor value, and failing to cope with a changed
retirement landscape, led to the Government
announcing its ‘pension freedoms’ in the 2014 Budget.
