UK savers are facing an income shortfall of £97 a week in retirement. With the cost of living continuing to soar, statistics show that most savers aren’t contributing enough for their futures.
The average cost of living (including housing costs) for a UK pensioner is £409 per week. But the average UK retirement income is just £312 – leaving retirees with a shortfall of almost £100, according to pension provider Friends Life. This is over £5,000 per year that pensioners’ retirement incomes are falling short.
In retirement people rely on a combination of state pension payments, savings, investments, property and private and workplace pensions to provide them with an income. Increased living costs across the UK, combined with a lack of planning and awareness are being blamed for the shortfalls.
Shortfalls across the UK
The shortfall you may face will vary based on where you live, with Londoners facing the biggest income gap (an average shortfall of £123.87 per week), followed by those in the East of England (shortfall of £105.38) and Scotland (shortfall of £101.44). The smallest shortfall comes from those in the North East (£84.92) and the South West (£85.37).
This is how the shortfalls in some of the larger UK cities measure up:
| City | Average weekly Living Costs | Average weekly Retirement Income | Shortfall |
|---|---|---|---|
| London |
£471.92 |
£348.06 |
£123.87 |
| Birmingham |
£419.77 |
£316.52 |
£103.25 |
| Leeds |
£403.06 |
£306.69 |
£96.37 |
| Edinburgh |
£416.87 |
£323.65 |
£93.22 |
| Manchester |
£368.87 |
£280.52 |
£88.35 |
| Sheffield |
£364.19 |
£291.15 |
£73.04 |
| Bristol |
£342.33 |
£276.56 |
£65.77 |
Avoiding a shortfall in retirement
In order to ensure you have an adequate retirement income it is important to prepare early. Knowing your retirement age, how long you realistically expect to be retired, and the income you’ll need during your retirement all comes down to being prepared, saving as much as you can afford to and seeking advice where required. Here are 3 procedures you can take to start trying to close any gap you might have ahead of your retirement:
Enrol
Enrolling in your workplace’s pension scheme is a guaranteed way to start saving toward your retirement. As an additional bonus, any payments you make will also see a contribution made by both your employer and the government (in the form of tax relief). Many companies will have either auto-enrolled you into their pension scheme or will be in the near future (all companies must auto-enrol their employees by October 2018). You are entitled to opt-out but doing so is akin to rejecting a pay rise from your employer.
Set up a private pension
In addition to your workplace pension scheme you may also set up your own private pension plan. This allows you to choose different saving options such as stakeholder plans (typically with lower charges) and SIPPs (self-invested pension plans, where you decide where your money is invested. These are only recommended for those who are financially savvy and can afford to invest a large fund).
Boost your contributions
If you are already paying into a private or workplace pension scheme, one of the best ways to try and reduce a shortfall in your retirement income is to save more each month.
If you still feel you might be facing a pension shortfall in retirement, it’s worth seeking the services of a professional financial adviser. An financial adviser will be able to help you plan your savings, giving recommendations on products they feel will best suit your needs for a financially comfortable retirement.