Today’s workers will run out of savings just seven years into their retirement according to new research, reports Harris & Co Chartered Accountants Northampton.
HSBC"s The Future of Retirement study found that the average UK retirement is expected to last 19 years, but that average retirement savings will be used up within seven years – leaving people entering a period of significantly reduced living standards.
The 12-year shortfall in the UK is the worst in the study, which surveyed 15,000 people in 15 countries.
HSBC predicts that the situation is only likely to worsen as life expectancy continues to rise and people fail to face up to reality of making up the shortfall while they can.
Christine Foyster, head of wealth development, HSBC UK said: ‘The concept of retirement is evolving all the time, and we know many people aren’t prepared. But now we know by just how much.
‘People are living longer, through tougher economic times, but their expectations about their standard of living in retirement remain unchanged. They are putting off the inevitable, which is the reality of significant cuts to their living standards in their twilight years, after their savings run out.’
Worldwide, the study found that people will on average run out of retirement savings just over half way into their retirement. This will leave many unable to fund their retirement years and leaves people unprepared for additional living expenses in later, or frail, retirement, such as funding long-term care.
Currently 56% of the UK working population is not preparing adequately for later life, with one in five (19%) saving nothing at all. Financial concerns are their greatest fear about living in retirement; 63% say they fear financial hardship (compared to 57% globally), and 31% feel they will have to work longer then they want to.
While people in the UK recognise their inadequate savings, they believe they will be able to retire at the age of 65. And in further juxtaposition, over half (57%) of those not yet fully retired would willingly prioritise saving for going on holiday over saving for their retirement (compared to 43% globally).