Pension savings in the UK cut by £18 billion in the last 12 months as over 50s cut back, survey reveals

News - Savings

Written by Ray Clancy

Friday, 16 July 2010 08:28

Cash strapped over 50s in the UK have cut their pension savings by almost £18 billion with one in three pinning their retirement hopes on economic recovery, new research shows.

Some 64% of those within five years of retirement are more concerned about their financial situation than they were a year ago and they need to look at alternatives to boost their income, according to pensions, investments and insurance group LV=.

It has found that despite mounting concerns about their retirement prospects, Britain’s over 50s have reduced their retirement savings by almost £18 billion over the last year. Its annual state of retirement report shows that one in five of those approaching retirement have decreased their retirement savings by an average of £324 a month, or £3,800 a year.

This is more than double the £137 average reduction in retirement savings made by 20% of over 50s last year, suggesting retirement savers are jeopardising their long term financial security in order to deal with more immediate financial pressures.

Women approaching retirement appear to be feeling the pinch most, with nearly a quarter cutting their monthly retirement savings by an average of £372, or £4,464 a year. By comparison, one in five men approaching retirement have reduced their retirement savings by an average of £265 a month, or £3,180 a year.

And despite some improvement in equity markets over the past year, fewer than one in 12 of Britain’s non retired over 50s have increased their pension savings over this period.

The researchers also found that over a third of non retired over 50s are pinning their hopes of a comfortable retirement on a ‘substantial economic recovery’ in the UK. This reliance rises to nearly half of non retired over 60s, with 18% of this group admitting they are now entirely dependent upon economic recovery to secure the retirement lifestyle they had been expecting.

A huge 2.8 million people aged over 50 say they will be forced to delay their retirement. Nearly one in five claimed to be angry about this situation and a further 47% are disappointed.

‘Britain’s over 50s have already seen their pension pots damaged by the economic crisis, and now many appear to be diverting still more money away from retirement saving to deal with immediate pressures. We urge those already close to retirement not to give up on saving at such a crucial time. These days there are far more financial options available as you reach retirement age, everything from drawing an income while your pension stays invested, to releasing equity from your home,’ said Ray Chinn, LV= head of pensions.

The research also found that the main factors behind this growing anxiety are the rising cost of food and utilities, the lower interest rates available on their savings and the effects of the ongoing economic downturn.

And only 41% of those approaching retirement have a ‘fair' or ‘good’ idea of how much income they will have to live on when they retire, while a further 14% say they will be totally reliant on the State to support them financially.

Despite their concerns about financial security in retirement, only 20% have consulted an independent financial adviser.