Individuals ‘underestimate retirement needs’

A significant proportion of over-40s in the UK may have underestimated the amount they need to live comfortably during retirement.

Research from Aviva has shown as many as six out of ten wish they had started saving towards their retirement at a younger age, while three out of ten people in this age group still have no plans in place as to how they will fund their lifestyle during their golden years.

This could see many resorting to additional loans and debts to pay for essential outgoings when they get older, with remortgaging, borrowing and equity release some of the last options open to those who have failed to plan effectively for the future.

Clive Bolton, managing director of Retirement Solutions and director at Aviva, said: "For many, their retirement is a time they are looking forward to [and] most people, even those who still have a few years to go until they retire, have got some idea of how they would like to spend their retirement.

"It's all very well to have an idea of what you want to do after you finish working, but many people underestimate how much money they will need.  

"Your state pension is unlikely to cover everything you want to do during your retirement, so it's important to have some kind of financial plan in place to provide additional funds."

Overall, the study showed the average amount required per annum for a retired individual to achieve their desired quality of life currently stands at £15,000 – obviously this is closer to £30,000 a year when it comes to couples.

Broken down by areas of expenditure, the average retired Brit will spend £537 a month on essential bills like utilities and food (£6,447 a year), while keeping a car running will cost an additional £170 per month (£2,044).

Private healthcare or insurance will set individuals back a further £308 per annum, while visiting family and buying gifts for children and grandchildren will see a further £1,156 spent on average.

Holidays tend to make up a significant proportion of annual budgets for retirees, with retired Brits typically enjoying one trip abroad coming in at almost £1,000, as well as two breaks within the UK of just over £300 a go.

Moreover, a further three weekend mini-breaks are typically enjoyed by this group, costing a further £500 a year.

Finally, hobbies and activities were shown to be a significant area of expenditure for many retirees, with individuals spending on average £176 per month (£2,114 a year).

Aviva's research also revealed some of the favourite activities for retirees across the UK, with those who have moved beyond the world of work having far more free time to enjoy the activities and hobbies that perhaps they were too busy to really embrace in the past.

As such, the top ten pastimes for retirees include cooking/baking, taking up a class, photography, researching their family tree, going to the gym, joining a book club, visiting antique/vintage fairs, knitting, golf and yoga.

Posted by Joe White