Older savers planning to supplement their pension income with a cash nest egg in retirement are not saving enough to meet their targets.
While people below the age of 35 are on track to save the relatively modest amounts they are aiming for by the time they retire, those over 35 are falling short, according to a survey by HSBC.
Those closest to retirement furthest from savings goals
The over 55s face the most significant shortfalls. The average value of the cash pot they would like to save is £99,495 but they will only have saved £31,874 by their retirement if they continue to save at their current rate – £67,621 less than the desired amount. They need to save £10,045 more each year to meet their targets.
Although 16 to 24-year-olds plan to save just £48,395, they are on track to build up as much as £99,982 if they keep saving money at their current rate.
Saving capacity dips as responsibilities grow
The challenges faced by the over 35s to save enough for their retirement may be explained by the extra demands often placed on their finances as they get older, such as the cost of bringing up children, mortgage costs and servicing higher debts.
Having a pot of cash at your disposal in retirement can significantly improve your standard of living. The state pension pays you £5,587 a year and the average private pension pot of £27,207 provides an annual income of less than £1,400. This would provide a total income of less than £7,000 without any extra cash to supplement it.
The average cash nest egg of £70,100 will give you an extra £3,689 a year based on a life expectancy of 19 years at age 65.