One in five workers approaching retirement age have decreased their savings by £3,800 a year. According to the annual State of Retirement Report from LV=, as a nation, over-50s have reduced their retirement savings by £18 billion in the past 12 months.
This is a huge increase on last year, when, although savings were being cut, it was only by £137 a month, now it is £324 per month. The reason behind it is that money is required now to deal with problems as a result of the recession. However, more than a third of non-retired over-50s are depending on economic recovery. This figure rises to 46% for over-60s, with almost a fifth admitting that the only way they will be able to have the lifestyle they want is if there is substantial economic recovery.
Only 40% actually know how much they will have to live on, suggesting the rest don’t have any idea whether their savings will be enough. Of those that do know, 14% say they don’t have enough savings to support themselves so will be totally reliant on the state, which is worrying as money for pensions is in short supply, especially now we have an ageing population.
It seems many people are trying to go it alone when it comes to saving for retirement. Two-thirds of over-50s have never consulted a financial adviser and many don’t have designated pension savings accounts. With the increasing cost of food, VAT rises, lower interest rates and increasingly slow economic recovery, there could be big problems ahead for those people with little or no savings.
Saving doesn’t have to be complicated or challenging, neither should it be a financial drain. Many people set the standards too high, i.e. they try to put away too much each month that it becomes unaffordable and they expect returns in an extremely short period of time.
The best time to start saving is as soon as you start earning. Once a graduate has paid off his or her student loan, the same amount paid back to the Student Loans Company should be put into a savings account.
However, if you are in your 50s don’t panic thinking it is too late, it isn’t. Saving in ISAs means you can save up to £10,200 each year completely tax free. Bonds offer even better rates, although you do have to pay tax. Remember to view savings as long-term investments from at least two years, but five to ten years is even better.
Santander offer a range of savings options including ISAs, bonds and online savings accounts.