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Pension warning: Britons choose ‘rainy day savings’ over preparing for retirement

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Pension saving is usually a long-term endeavour which involves regularly putting money aside to build up a pot for retirement. In so doing, Britons are often able to secure the later life they have been hoping for, using the money they have put aside to reach particular goals. However, there is concern many are likely to be woefully unprepared for their retirement in the future, due to actions taken in the present.

Research undertaken by BlackRock in the latest DC Pulse Survey, has shown many are now prioritising “rainy day” savings over putting towards their retirement.

Some 51 percent of those asked said they had plans to review or reduce their pension contributions to have more money for emergencies amid the pandemic.

While it is often advised to have three months worth of savings in case of difficult circumstances, pension saving is important too.

Failing to save amply enough for retirement could be disastrous, as it could prevent Britons from reaching certain goals after leaving the workforce.

And it appears that while many are reducing or reviewing contributions, concern is still rife about retirement.

A total of 51 percent of savers said they were not on track to achieve the sort of lifestyle they hoped for in retirement.

This was combined with a staggering 100 percent of those aged 65 and over believing they have fallen behind on their retirement savings.

However, COVID-19 has potentially brought about a good attitude towards saving in general.

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Out of those asked, 76 percent said they would be more careful about their finances in the future. 

Alex Cave, head of UK institutional DC at BlackRock commented on the findings.

He said: “Our research clearly evidences many people are struggling with matching expected retirement lifestyle with what will be reality.

“In the current environment, people are understandably having to prioritise short-term financial pressures over longer-term retirement ambitions.

“Still, we believe that being invested – and staying invested over the long-term – enables compound interest to work for savers throughout their working lives and allows their capital to work much harder for them.

“It is imperative to stress the need to stay committed to pensions throughout these months of uncertainty, particularly in light of the potential ‘lower forever’ rate environment for savers.”

Mr Cave said the view of BlackRock was that Britons should be putting away at least 15 percent of salary over time.

This, he added, should be combined with the right level of portfolio risk versus return in terms of investments.

By doing so, people can ensure they secure the type of lifestyle they are hoping for in retirement.

It is generally stated Britons should be reviewing their pension savings and investments on a regular basis.

This is because wants and needs often shift, and people may wish to change their arrangements to suit their desires.

Finally, checking a pension can also ensure a person is getting the kind of return they hope for.

If not, they can explore the other options which may be available to them to help them meet their retirement goals. 

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