Not everyone will have enough money to live on when they retire - even if they have diligently paid into a pension for many years.
Many have underestimated how much they will need to maintain a decent standard of living.
This gap, between their actual income and the amount they need, is known as an income shortfall.
As a general rule, to provide a comfortable standard of living, people need to put 50-67% of their expected final salary into their personal pensions.
You will not need as much to live on in retirement as when you were working, but you should include enough to cover any current debts and luxuries like holidays and travel.
Once you've established that figure, you need to multiply it by at least 20 to calculate the size of the overall pot required.
That's because on average, people live for two decades after retirement.
If you are facing an income shortfall, you will not be alone.
A recent study conducted by Prudential showed that two of every five pensioners surveyed felt they needed 22000pa to live comfortably, but their actual income was only 15800pa.
The average shortfall is about 7000, and while this doesn't mean pensioners are living in poverty - many still live within their means - it's not an ideal situation and can be avoided.
Women in particular should beware - the research found 41% of those surveyed were finding it difficult to live on their retirement income.
So what should you do if you're facing an income shortfall?
If you are facing a shortfall, your options include:
€ Maximising your savings: as well as contributing to company and personal pensions, consider other options like ISAs, and contributing to your partner's pension fund. You could also look into other sources of income like part-time jobs, or deferring retirement.
€ Reviewing investment strategies: look at where your pensions are invested, gauge their performance and find out which charges have been levied on them, and which plans have guarantees. You could consider consolidating your existing plans, or protecting capital values. Or think about moving some of your assets in to higher risk equities, which could provide a better, quicker return.
€ Reducing your tax liabilities: ensure any additional pension savings don't exceed your lifetime allowance, as this would leave you liable to a larger tax bill.
Other options include moving to a less expensive property, releasing equity in your home, or selling other assets to raise funds.
Don't leave it until the last minute to decide what to do with your pension plan. You could rush into chossing the wrong option, and significantly reduce your income in retirement.
Many have underestimated how much they will need to maintain a decent standard of living.
This gap, between their actual income and the amount they need, is known as an income shortfall.
As a general rule, to provide a comfortable standard of living, people need to put 50-67% of their expected final salary into their personal pensions.
You will not need as much to live on in retirement as when you were working, but you should include enough to cover any current debts and luxuries like holidays and travel.
Once you've established that figure, you need to multiply it by at least 20 to calculate the size of the overall pot required.
That's because on average, people live for two decades after retirement.
If you are facing an income shortfall, you will not be alone.
A recent study conducted by Prudential showed that two of every five pensioners surveyed felt they needed 22000pa to live comfortably, but their actual income was only 15800pa.
The average shortfall is about 7000, and while this doesn't mean pensioners are living in poverty - many still live within their means - it's not an ideal situation and can be avoided.
Women in particular should beware - the research found 41% of those surveyed were finding it difficult to live on their retirement income.
So what should you do if you're facing an income shortfall?
If you are facing a shortfall, your options include:
€ Maximising your savings: as well as contributing to company and personal pensions, consider other options like ISAs, and contributing to your partner's pension fund. You could also look into other sources of income like part-time jobs, or deferring retirement.
€ Reviewing investment strategies: look at where your pensions are invested, gauge their performance and find out which charges have been levied on them, and which plans have guarantees. You could consider consolidating your existing plans, or protecting capital values. Or think about moving some of your assets in to higher risk equities, which could provide a better, quicker return.
€ Reducing your tax liabilities: ensure any additional pension savings don't exceed your lifetime allowance, as this would leave you liable to a larger tax bill.
Other options include moving to a less expensive property, releasing equity in your home, or selling other assets to raise funds.
Don't leave it until the last minute to decide what to do with your pension plan. You could rush into chossing the wrong option, and significantly reduce your income in retirement.
Source...