I know, you’ve heard it all before. But before you think “oh no, not again” (and click back), perhaps you should read the next bit…

I have just picked up on a few points from a recent report issued by The Institute for Fiscal Studies and the National Association of Pension Funds (NAPF). They found the following startling facts:

1. Over 30% of people between 52 and 64 have no idea what their workplace pension would be in retirement.
2. 60% of people over the age of 50 who are still in work have not thought about how many years of retirement they would need to finance.
3. Millions of workers will be poorer than they expected when they finally stop working.
4. Women in their 50’s believe that they will live until 84 (actual life expectancy is 88) whereas men in their 50’s expect to live until 83 when their actual life expectancy is 85. (Think of it this way, a man retiring at age 65 still has a significant chunk of lifetime still ahead of him, even more for a woman.)
5. The current level of funding would require investment returns in excess of 77% pa to produce the expected income in retirement. Given that the average pension fund grew by just 4.3% last year, it shows the magnitude of the problem.

What they have found is not exactly new. I remember wise words from an experienced colleague when I joined the financial serives profession over 33 years ago:

“The most important pension contribution that can ever be made is the first contribution – because this is the one that has the longest period to grow”

To put it another way, the earlier one starts planning for retirement, the better.  Infact it is blindingly obvious in some respects, it’s just that this report has put a “little more meat on the bone”.

The maxim “no pain, no gain” also applies. This is true in many facets of life, it’s just that retirement planning seems to bring out the worst in us and sadly we leave ourselves open to a lethal and toxic combination of inertia, “mañana” and over-expectation.

The cold hard truth is that some people are not saving enough to fund their retirement. Although obvious and well documented, it is a problem that has not got any better in the last 30 years.

Planning for retirement can come in many different forms, not just pensions; I have documented this on a number of occasions in past blogs – my point is that whatever methods are used, they should be addressed sooner rather than later with the above facts in mind.