Retirement can be a long road...

Retirement can be a long road | Sinica Kover - stock.adobe.com

The report from retirement specialist Standard Life reveals nearly a third of retirees say their standard of living is now worse than before they retired, compared with just one in five who say it has improved.

The findings highlight the pressure many retirees feel once regular earnings stop, particularly as rising living costs continue to affect household budgets.

The research points to a clear gap between retirement expectations and reality. Nearly one in five retirees say they underestimated how much money they would need in retirement, while 16 per cent admit they had not expected retirement to last as long as it has.

This comes at a time of growing concern around retirement adequacy more broadly. From inflation spikes and global instability, to the lasting impact of the pandemic, many of the factors shaping retirement today would have been difficult to foresee in advance, says Standard Life.

It adds that personal life events, such as raising children, redundancy or divorce, can also disrupt long-term saving plans and make retirement harder to prepare for consistently.

Retirement is no longer just about building a pension pot

Standard Life explains that while much of many people’s focus during their working lives is on building up pension savings, many retirees say the biggest challenge comes after they stop working. People are increasingly responsible for managing their own retirement savings.

According to Standard Life, while many of today’s retirees have defined benefit schemes that provide a guaranteed income, most future retirees will rely on defined contribution pots, often built up across multiple employers, meaning more decisions about how that money is used in retirement.

Standard Life’s research highlights how the transition from saving into spending is an area many people feel underprepared for. About one in eight retirees say they wish they had a better understanding of how to turn their pension savings into an income, while a similar proportion say they regret spending too much too early in retirement.

Findings from the Pensions Commission highlight the scale of this challenge. Some 30 per cent of private pension pots are accessed at the earliest possible opportunity, with about half withdrawn in full.Looking backIn hindsight, many retirees say earlier action would have made a meaningful difference to their financial security later on in their retirement.

Separate research from Standard Life looking at the role of major life moments in interrupting long-term saving habits reveals that three in ten say they wish they had saved more regularly during their working life, with 29 per cent regretting not starting pension saving sooner.

However, for many retirees, saving consistently was not always straightforward, with retirees highlighting that having children had the biggest impact on their retirement savings (15 per cent), followed by divorce(10 per cent) and redundancy (9 per cent).

Mike Ambery, retirement savings director at Standard Life, comments: “Retirement is one of the biggest transitions people will ever make, yet it’s easy to underestimate just how challenging the journey to and through it can feel.

“People are living longer, costs can remain high long after work finishes, and retirement itself may now last decades rather than years.“

Recent years have also shown how difficult it can be to predict some of the wider economic and global factors that shape retirement, from inflation spikes and market uncertainty to the lasting impact of the pandemic.

“It’s understandable that some retirees feel their finances are under greater pressure than they originally anticipated, particularly if they underestimated how much they might need or how long their savings would have to last.”

Some top tips for making your money last

◆ Understand what you’ve got before you make a plan. Pensions can work in very different ways.

◆ Consider the kind of retirement you want. Thinking about the lifestyle you’d like in later life – whether that’s covering the essentials comfortably, or enjoying more freedom for travel and hobbies –can help bring savings goals into focus.

◆ Think carefully about how you might take your income.

◆ Be realistic about what retirement might cost. Spending doesn’t stop in retirement,and many people find that essentials, lifestyle choices, and unexpected costs can add up to more layout than expected. Building in some flexibility can help avoid financial pressure later on in retirement.

◆ Stay engaged and keep your financial plans up to date.