Southeast’s high earners are set to have a pension shortfall wealth managers warn

Southeast's high earners are set to have a pension shortfall wealth managers warn

Meanwhile, 35–44-year-olds are under particular financial pressure, thanks to competing savings priorities which see them having to choose between their own retirement, their children’s futures, and commitments to long- and short-term spending.

Brewin Dolphin’s ‘Relationship with Money’ report collated the results of 2,000 interviews with inhabitants in the Southeast earning over £50,000, in February 2022.

The income for this demographic puts them in the top 9 per cent of the UK adult population, and up to 32 per cent of the interviewees described themselves as ‘confident’ in their attitude to money. Only 6 per cent said they were ‘not confident’.

However, the report showed people seemed to draw a distinction between current money management and investment, with 48 per cent not investing, while 59 per cent did not believe or weren’t sure they would have enough in the pension pot to retire comfortably on.

The average amount those polled believed they would need for a comfortable retirement was £506,000, yet high inflation could mean a significantly higher pension pot was needed in 10-20 years’ time.

Meanwhile, respondents estimated they wouldn’t be able to retire until 64, compared to their ideal retirement age of 58.

According to Brewin Dolphin’s calculations, to retire at 64 with a £251,000 pension pot with enough savings to last to age 90, a person would have to limit their retirement income to just £13,500 a year.

Even at the upper end of the scale, a £500,000 pension pot would produce income of £26,500 a year to age 90. This assumes their pension fund grows at 5% per annum after charges and the income increases annually with inflation.

If they qualify for the full state pension, this would add around £9,600 a year in today’s terms, bringing the totals to just over £23,000 and £36,000, respectively – but still significantly lower than the over £50,000 annual income higher earners were accustomed to.

Brewin Dolphin’s Tunbridge Wells financial planner Lee Clark acknowledged this would be a difficult adjustment.

“Telling people to save for their retirement is a really tough message at the moment.

“The cost-of-living crisis is only just starting to bite, and many people don’t have any money left after buying food and paying their bills. We know many people cannot afford to save for their retirement.”

However, it could be a particularly difficult balance for 35-44 year-olds, warned Brewin Dolphin.

The survey showed a financially-pinched age-group being pulled between saving for retirement, their children’s futures, specific purchases or projects and ‘rainy days’.

Sounding a warning for the wider population, Brewin Dolphin CEO Robin Beer added: “The fact our research focused on higher earners – who one might expect to be better prepared than the general population – suggests that we are facing a wider societal problem in terms of saving for the future.

“With the cost of living continuing to rise, saving more today is a tough ask. Yet if we are to look forward to a financially secure future, it is vital that we find ways to bolster our long-term finances.”

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