Published On: 31 May 2023

The current generation of retirees is experiencing better financial outcomes than previous generations, with lower pensioner poverty rates and comparable incomes to those below state pension age, according to the Institute for Fiscal Studies (IFS). 

However, the sustainability of this success is in question, as the IFS warns that policymakers may become complacent, potentially putting future generations at a disadvantage. 

One concerning finding highlighted by the IFS is that nearly two-thirds of middle-earning private sector employees who contribute to a pension are saving less than the recommended 15% of their earnings. This is particularly significant as the majority of these individuals have defined contribution pensions, which expose them to potential risks that may be challenging to manage effectively. 

Managing finances through retirement with a defined contribution pension can be difficult, with risks of running out of resources or unnecessarily living with financial austerity, according to the IFS. 

Another area of concern is the low retirement savings rate among self-employed individuals, with less than one in five saving for retirement. The IFS also notes an increase in the number of people approaching retirement who rely on expensive and insecure rental accommodation, potentially leading to lower standards of living or increased dependence on housing benefits. 

To address these challenges, the IFS is conducting a comprehensive pensions review to identify future risks and propose necessary measures for a secure retirement for working-age individuals. However, implementing these recommendations remains uncertain.  

In the meantime, seeking professional and regulated financial advice is crucial for securing a decent retirement outcome. A financial adviser can assess your financial situation and provide personalised recommendations to help you plan for the future. At Murdoch Asset Management, our expertise and commitment to acting in your best interests will give you the confidence to make informed decisions along your retirement journey.

 


Sources 

https://ifs.org.uk/news/major-new-pensions-review-warns-substantial-risks-finances-future-generations-pensioners 

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