High net worth-individuals in the UK are underestimating how much money they need for the retirement they envisage, the latest figures from wealth management firm Saltus show.
On average, respondents to the Saltus survey said a pot of £663,308 would be sufficient for a secure retirement. However, the Saltus pension calculator determined that, factoring in inflation, a pot of at least £1.5m is needed to achieve an annual income of £43,900 – the amount the Pension and Lifetime Savings Association says is required to retire comfortably. The pot size required increases to £2.5m for younger respondents.
Of the 2,000 UK adults surveyed with more than £250,000 in assets, one in five (18%) believe they would need an individual pension pot of between £401,000 and £600,000 for a comfortable retirement, while 13% believe they would only need between £201,000 and £400,000.
Furthermore, the respondents currently have shortfalls of between £250,000 and £950,000, depending on their age, meaning many of those aged 54 and over will fall short even taking into account the state pension. Currently, the average pension pot among respondents is £520,052 while annual contributions are around £30,000.
The Saltus Wealth Index Report shows that only 8% are contributing the maximum £60,000 allowed in pensions savings per year. Although the average planned contributions are gradually rising – from £28,198 last year to £30,018 for the year ahead – the rate of saving continues to lag what’s needed to meet retirement expectations.
Mike Stimpson, partner at Saltus, said: “We’re seeing a clear disconnect between expectation and reality in retirement planning. Many high earners assume they’re on track, but the findings suggest otherwise.
“It’s concerning that most people are falling short of their retirement goals, especially as pension pots are increasingly used to support family or cover rising living costs.”
Stimpson pointed out retirement planning will be further complicated by IHT changes kicking in from April 2027, when unused pensions and certain death benefits will count towards an estate, suggesting they could make pensions less attractive as a wealth transfer tool, particularly for high net worth individuals who rely on them to pass on wealth.
“Still, the £60,000 annual pension allowance remains a powerful way to build wealth tax-efficiently, but with demands on savings coming from many directions, planning is more important than ever,” he said.
