Just how much is your pension worth?

Just how much is your pension worth?

Posted on February 25, 2009 in Educational blog, News, UK

Danielle Aw

Hi everyone,

Just a quick introduction to myself and my role here at Your Property Club.

I’m Dani and Brett has me on board to research retirement options — specifically comparing property with pensions. My job is to dig through websites, reports and Government white papers and condense what I find into easily understandable reports. This (hopefully) will inform you as to the current state of pension schemes in this country and help you make educated decisions about your future.

It is quite astounding that the majority of people (almost three quarters of those taking part in the Department for Work and Pensions’ Attitude to Pensions survey in 2006) expected their main source of retirement income to be pension-based but just 9% believe it is the best way to make the most of their money.

So it seems people are virtually defaulting to pensions to save for retirement, despite a clear lack of confidence in their investment potential!

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With the data we will unearth over the coming months, we hope to challenge this almost automatic view that to invest for retirement you should be saving your money in a pension.

Already I’ve come across something we thought would give you pause for thought:

A recent survey by the Association of British Insurers (ABI) found that 71% of their respondents felt that they would need 51% or more of their current income to achieve a comfortable retirement. When asked how much they thought their individual pension fund was worth, it turns out that 60% of respondents have a pension pot worth less than £40,000.

To put that into annuity terms, according to the Financial Services Authority Comparative Tables (from October 2008), a £40,000 pension pot would generate a gross monthly income of £245, which is just £57 per week 1. That means for a full time employee on median earnings, a pension pot of that size would generate only 13% of their pre-retirement income.

To us, that seems like an awful waste of resources for a very small reward.

Given this, maybe it is time to re-evaluate your retirement plan?

If you have concerns about how you’re going to fund your retirement, or if you’d like to chat to us about how to build your property portfolio over the coming years to give you the lifestyle you’re looking for, do give the team a call on 0207 812 1255.

Warm Regards,

Dr Danielle Aw, PhD
Senior Research Analyst

1: This is based on a single male, non-smoker, aged 65 who purchases a level annuity with no guarantee and excludes any tax-free lump sum taken out at point of annuitisation.

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