Personal Finance: Your Pounds 51,000 Pension Hole
Byline: Steve Pain
The average worker is facing a pounds 51,000 shortfall in the amount they need to save into a pension to have a comfortable retirement.
Market analyst Datamonitor said people had saved an average of pounds 30,000 into private and company pensions, and it warned they needed to boost this by at least pounds 51,000 if they were to retire on two-thirds of their final salary.
It warned a failure to put this extra money aside would cut someone's retirement income by around pounds 4,000 a year.
It added that if people did not make up the shortfall they would be living off just pounds 13,000 once they stopped working, taking into account the money they would get from the basic state pension and state second pension.
Oliver Guirdham, life and pensions analyst at Datamonitor, said: 'We are talking about the funds that people will need on the day that they retire, so for many people there is still time to adjust. UK citizens have built up relatively large private pensions savings relative to many European countries, however, there is still the need for more and the Government needs to help them do this.'
He said Government initiatives aimed at boosting savings, such as the launch of low-cost stakeholder pensions, had so far largely failed.
He added that people's pension pots had been hit hard by falling stock markets between 2000 and 2003, and the Government had exacerbated the problem by removing tax credits from pension schemes, reducing the amount accumulated by around pounds 5 billion a year.
At the end of 2003, private pension funds in the UK were collectively worth pounds 1.9 trillion, dwarfing the next largest, the Netherlands, where people have pounds 500 billion.
However, Datamonitor said in many European countries people were more reliant on the state to provide them with a retirement income, with people getting up to 80 per cent of their salary from the state pension during retirement. …