The National Association of Pension Funds (NAPF) recently published the result of a survey regarding how people plan for their retirement. One of the shocking revelations of the survey was how many working people count on inheritance to support themselves when the time comes for them to retire.
As many as 15%, or more than one in six, claimed they planned to fund their retirement off of inheritance. Last year that figure was only one in ten, and the rise has made the NAPF concerned. Those who do not have an inheritance to rely on may want to increase their pension contributions, either by putting more money into their workplace pension or taking out a second pension.
The NAPF’s cheif executive Joanne Segars said that while inheritance may play a big role in someone’s retirement savings portfolio, the rising figure of people relying on this is troubling. She went on to say that it is a risky thing to rely on, since with the costs of growing old, there is no telling how much money will actually be left to the hopeful retiree.
It’s easier to count on and estimate one’s own savings, as people can use a pension calculator and speak to financial advisers to get a better understanding of what to expect in retirement.
The survey, done by Populus on the NAPF’s behalf, discovered that those close to retirement age, 45 to 54, rely the most on inheritance as the basis of planning for their retirements. As many as one in five of this age group said that they will rely on inheritance as their pension.
Ms Segars explained this by saying that those close to retirement put greater faith in what will be left to them in a family will, perhaps because their own savings are inadequate.
Not enough saved
That is really the crux of the issue. Ms Segars said that unfortunately less than half of the UK workforce is putting anything at all into saving for their retirement, so inheritance might be the only hope for them not to drastically lower their standards of living come retirement.
She advised all workers, but particularly those who are 10 years or fewer away from retirement, to look into contributing regularly to their company pension.
Increasing pension contributions can make a big difference to savers’ retirement pots, especially with the help of employer contributions and tax breaks. With the risk of so many people retiring poor however, she adds that a ”simpler, more generous state pension should be on the top of the Government’s to-do list.”
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