93% of people haven't saved enough for retirement

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senior woman in sports car

An astonishing 93% of people have failed to set aside enough money for the retirement they are planning - leaving just 7% on track for truly golden years. The figures emerged in a new report, which found that as a result of our failure to save, our annual income will fall a startling £23,000 short of the amount we need.

How has this happened?

The report, from Aegon, asked people a number of questions about the lifestyle they wanted in retirement - in order to calculate how much money they would need in order to meet their expectations. They worked out that on average we need £35,000 a year to retire in comfort.

They also asked about the savings people had already put aside, and worked out that we'll have just £12,000 a year to live on in retirement - so there will be a massive £23,000 shortfall in our annual income.

It found that just 7% of people were anywhere near being ready for retirement, and nine out of ten people are set for a major disappointment when they discover what they will need to live on.

How did this happen?

Part of the problem is that people think the state pension will provide more of a safety net than is actually on offer. Some 56% of people over-estimated the weekly state pension. They have also failed to take into account the changes in the state pension age. So, for example, on average 25-year-olds want to retire at the age of 64 - yet current predictions are for the state pension age to be 68 by the time they get there.

The other issue is that even where people have started a pension, 30% of them have never revisited it to see if they are saving enough. As a result many of them are not: women are saving an average of £175 a month which is far short of what they need, while men are saving £328 a month.

And even when people have paid some attention to whether they are saving enough, many have no idea how the money is performing in the pension. Some 42% have no idea how their investments have performed - so they may well be falling short undetected.

What can you do

Aegon released the report with the launch of a tool that will help you calculate how prepared you are for retirement, and highlight what you need to do. There are a number of calculators online which will work out what you need to save, so these are useful starting points.

However, it's important not to be overwhelmed by the results - which are likely to show you need to do far more to save for retirement - and give up. It's important to bear in mind that anything is better than nothing, so work out what you can possibly spare each month right now, and invest that.

It's worth looking at your company pensions scheme, because many will make contributions for you and help boost your efforts.

Beyond that, the tax boost offered in a personal pension make this an efficient way to save at the moment, so consider this alongside investment ISAs for long-term investments.

Don't worry if what you can afford falls short of what you need to invest in the long term, as long as you revisit it every year, increase your investment with each pay rise, and make an effort to find a bit more cash in your budget, you should maximise your chances of being ready when the day comes.

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