You may have a sinking feeling that you haven't saved enough for retirement, but the chances are that you're massively underestimating the scale of the problem. A new study has shown that we will all see our income fall at least a third when we stop work, and that some people will lose half their income.
So where has it all gone wrong?
Income destroyedMost of us expect to earn less in retirement, but it's going to come as a nasty shock when we realise exactly how much less we will have to live on. Annuity provider, Partnership, found that on average income will fall 38.5% the day you retire - to £11,600.
Andrew Megson, Managing Director of Retirement at Partnership, said: "While people in retirement are likely to have fewer outgoings, it is still hard to imagine that anyone would not feel the pinch if they lost a third of their income over night. Even if their pension is topped up by income from savings and investments or part-time work, it is still likely to be quite a shock."
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In some parts of the country the numbers are even more terrifying. In London incomes will fall 48%, while in the East of England and the South East they will fall 40%. In terms of counties, there will be plenty of pain in Buckinghamshire where incomes will drop 45%, Cambridgeshire, where they will fall 44%, and Leicestershire where they will be down 42%.
Why?Tom McPhail, Head of Research at Hargreaves Lansdown says he isn't surprised by these figures. He adds: "Most people significantly underestimate both how long they will live in retirement and how much money they are going to need to live on. Typically, they start too late, save too little and expect too much."
Partnership warned that anyone relying on pensions needs to pull out all the stops to bolster their retirement income while they still can. McPhail said: "Everyone should take the time to find out how much is being paid into their retirement savings, what kind of income it might produce and when they can expect to retire. A comfortable retirement won't happen by accident."
The penalties for failure are severe, as McPhail points out: "We anticipate that within a few years, retirement at 70 will become the norm unless people plan ahead."