Pension savers are setting unrealistic retirement goals

06 December 2013

Pension savers are having unrealistic expectations for their retirement, according to a report from investment firm BlackRock. Experts believe unless adjustments are made now, retirement savers will experience a massive shortfall in their retirement income as there is a considerable gap between their expectations and the reality.

The report analyzed the investments of pension savers in Britain, Italy and Germany, and found the need for them to adjust their retirement expectations to more realistic levels.

In Britain, an average household expects a retirement income of £27,400 a year from a total savings fund of £259,000. However, according to BlackRock, pension savers will need more than double that amount in order to achieve their target retirement income – which means they should be saving £525,000.

Experts believe even £27,400 is a distant target to begin with for most retired households as the current average income for a single pensioner in Britain is £15,500.

Unrealistic expectations from pension savings are not limited to Britain. Pension savers in Germany expect an average annual retirement income of £36,627 from a savings pot of £152,338, whereas in reality an investment fund of around £832,000 will be required to provide this level of income after retirement. In Italy, pension savers face the same problem as their expectations fall short of reality by more than £446,000.

Seeking professional advice

Research also showed that pension savers mostly rely on internet and media for financial advice, but many are now beginning to understand that there is another option – professional financial advisers. The investment firm believes it is important to seek qualified financial advice in order to work out long-term investment targets as such investments require consideration of a number of factors.

Of the respondents, only 14% consult a financial adviser. These numbers are slightly higher in Europe with 17% of pension savers in Italy, and 21% in Germany consulting professional financial advisers. Research showed many people were either unwilling or could not afford to seek professional advice, with an average 15% in each country saying they might consider seeking professional financial advice later on in life.

Pension Savers who had sought professional advice regarding their investments were generally happy with the results. More than 90% of the respondents (96% in Britain) said they were highly satisfied with their efforts at financial planning. A similar number considered professional financial advice ‘value for money’.

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