Savings estimates for retirement are well wide of the mark

Many UK investors are getting their sums badly wrong when estimating how much they need to save in order to receive the annual income they would like to receive in retirement, according to the latest research.

Financial adviser David James of EFG Independent Financial Advisers in Birmingham, said research from BlackRock made sobering reading.

“It showed that many UK investors were hopelessly wide of the mark when estimating what they need to save for retirement.

“For example, in Britain investors were hoping to achieve an annual household retirement income of £27,400 but estimated they would need to save only £259,000 to achieve this.

“The stark reality is, however, that in order to achieve this expected income, you would actually need to save £525,000 – double what most people think,” he said.

But even that is not the whole story.

“The average single pensioner currently receives just £15,500 in annual income – a long way behind what the survey respondents even hoped to receive,” pointed out Mr James.

He said that those planning for their retirement would benefit from taking professional advice, at an early age.

However, BlackRock’s research indicated that only 14 per cent of respondents in the UK were consulting a financial adviser, although around 15 per cent are “considering” getting financial advice.

But when those who do take financial advice were asked, 96 per cent of respondents in the UK indicated “high satisfaction” with their overall financial plan, with 94 per cent considering it “value for money”.

Mr James said that BlackRock’s research clearly indicated that those who do take financial advice are more positive and more in control of their financial future than those who don’t.

“The onus is on all of us as individuals to make the right savings and investment decisions and that can best be achieved by taking professional advice,” he said.