What is the average pension pot in the UK; should you be investing more?
Let’s go straight into the numbers, here's the average of what people in the UK currently have in their pension savings (their pension pot):
Average pension pot by age:
16-24 - average pension pot value is £2,700
25-34 - average pension pot value is £9,300
35-44 - average pension pot value is £30,000
45-54 - average pension pot value is £75,500
55-64 - average pension pot value is £107,300
Looking into these figures in more detail, using a 5% return on investment, a pension pot valued at £107,300 will generate £5,365 per annum. Would you be able to live off this a year? NO!
One of the main problems with individuals in the UK is that they do not save enough money for their retirement. People will often get caught up in the day-to-day spending, not making a clear plan on how they are going to achieve their long term goals and objectives.
Can we invest more? Navigating Retirement Realities:
With the average pension pot in mind, the question arises: Should individuals consider investing more to secure their financial future? Several reasons go into this:
Increasing Longevity: With life expectancy on the rise, retirees face the prospect of funding longer retirements. Investing more now can help mitigate the risk of outliving one's savings.
Inflationary Pressures: Inflation erodes the purchasing power of money over time. By increasing contributions and investing strategically, individuals can strive to outpace inflation and preserve their standard of living in retirement. Holding money in cash can lose substantial buying power over time, so it is important to use tax efficient structures such as the pension.
Enhanced Returns: While pension contributions offer tax advantages, the returns generated within the pension pot are crucial. By investing in diversified assets with growth potential, individuals can optimise their long-term returns and increase their retirement savings. Speaking to a financial adviser can help put you in the best possible position to capitilise on this.
Flexibility and Control: Investing more in a personal pension affords individuals greater autonomy over their retirement planning. With a wider range of investment options available, individuals can tailor their portfolios to align with their risk tolerance and financial goals. This will change throughout an individuals financial journey so it is important to review this regularly.
Strategies for Boosting Retirement Savings
For those contemplating increasing their pension contributions, several strategies can help optimise your retirement savings:
Maximise Employer Contributions: Take full advantage of employer matching contributions in workplace pensions to maximise savings potential. Often people will only be contributing the minimum, make sure you are contributing the maximum amount to gain the employer match.
Utilise Tax-Efficient Vehicles: Explore tax-efficient structures such as ISA’s, VCT’s and International Investment Bonds to enhance overall retirement savings. If you are unsure what these are, speak to one of the team today.
Diversify Investments: Adopt a diversified investment approach that balances risk and reward across various asset classes, including equities, bonds, and real estate, to achieve long-term growth objectives.
Seek Professional Advice: Consult a qualified financial adviser to assess your current pension provisions, identify areas for improvement, and develop a tailored retirement strategy aligned with your aspirations.
Building a robust financial plan
Financial advisers play a crucial role in crafting a robust financial plan that aligns with your aspirations and objectives. They begin by conducting a comprehensive assessment of your overall financial situation, leveraging sophisticated tools like Voyant and Cash Calc to gain insights into your current financial standing. They also will understand your risk profile. By meticulously analysing factors such as income, expenses, assets, and liabilities, advisers gain a holistic understanding of your financial landscape.
Subsequently, they collaborate with you to work out your goals and objectives, including milestones such as retirement. Using data-driven projections and scenario analyses, advisers map out a roadmap detailing where you stand presently, when you aim to retire, and the feasibility of achieving your retirement objectives.
This approach gives you a better understanding of where are you now; where do you want to get to; and how achievable it is to achieve your goals and objectives.
Conclusion: Empowering Your Retirement Journey
In the pursuit of a secure and fulfilling retirement, understanding the average pension pot value in the UK serves as a crucial starting point. As we can see this is incredible low to what it should be, the question is… What can be done about this? There are many benefits of investing more in your pension pot, and as a starting point, individuals can take proactive steps to enhance their retirement readiness. Through strategic planning, prudent investment decisions, and ongoing financial guidance, you can navigate the complexities of retirement planning with confidence and optimism.
For more information and personalised advice, book a one on one meeting with one of our financial experts today. Book in now to speak with an adviser
Disclaimer: This blog post is for informational purposes and should not be considered financial advice. Always consult a financial adviser for personalised guidance.
