Business

Today's workers may have to get by on £8.47 a day in retirement

Gary McDonald Business Editor

RATHER than facing a comfortable retirement, workers in Northern Ireland face the stark choice of working well into old age - or surviving on a paltry £8.47 a day.

A year-long research project into people's savings and debt habits has unmasked the true scale of the crisis that is developing, where thousands of people face a future of poverty and State-dependency in retirement, if indeed they are ever able to retire.

The 'Tackling the Savings Gap' project undertaken by financial services firm True Potential examined the true state of the UK's personal savings and debt habits, as well as preparations individuals are making for their own retirements.

And the data for savers in Northern Ireland makes grim reading, revealing that: n People are only managing to put away £1,370.76 each year towards their pension pot; n They are building a fund of £61,684 by the time they retire from which to live on; n Today's Northern Ireland workers are going to have to survive on an annual income of £3,084.20 in retirement, or a daily wage of just £8.47.

Over the last year True Potential asked more than 6,000 people in Britain and Northern Ireland about their personal finances and provisions for retirement.

And the findings indicate that a crisis in old age is looming, with people saving barely a quarter of the amount they will need.

Asked how much money they would need to live comfortably in retirement, 32 per cent of respondents said that they will require between £16,000 and £25,000 per year.

But to achieve an annual income of that size, they would need a fund totalling £400,000 from which to draw an annual income of £20,000 for 20.

And to reach a £400,000 pension pot requires an annual saving of £8,888 over a 45-year working life.

However, the effects of the financial crisis of 2008 onwards, high inflation, government austerity and low interest rates, as well as decades of poor financial education and complicated regulations, have created a savings gap (that's the difference between what people need to live comfortably in retirement and the amount they are actually on course to receive).

True Potential managing partner David Harrison said: "Without an enormous change in behaviour, it will be simply impossible for millions of people to retire until well into old-age. Indeed, many millions may never be able to retire."

He added: "Most people still prefer to save in cash, and that simply means that inflation will erode the value of their savings further.

"No one knows if there will even be a state pension to plug the gap in years to come, so I'm afraid the picture looks very bleak indeed."

He said it will take a monumental effort from governments, industry, individuals and communities to rediscover the UK's thrifty streak.

"Easy access to high cost credit through payday lending, high inflation and low interest rates, over-reliance on property to fund retirements, extremely poor financial education and a bloated buynow-pay-later culture have got us to where we are now.

"People need to be encouraged to save for their own retirements and that means we need far better personal finance education, more attractive products that benefit savers and not just the banks, and far simpler regulation."

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