Retirement dilemma: How much money do you really need?

Many of those under 55 in Britain don’t really know the answer to this age-old question, writes Penny Lovell

Now don’t worry, this is not a column about dating advice. This is about another tricky question that we Brits seem singularly unwilling to engage with, and is a question that we at Sanlam have spent months asking over a thousand UK residents; how much money will you need to retire?

The staggering fact is that according to our research, only 12 per cent of UK residents under 55 know the answer to that question. Do you? Because the evidence that we have collated as part of our What’s Your Number? campaign, suggests that people in this country are singularly underprepared for what should be some of the most carefree years of their lives.

There are endless conclusions to be drawn from this research, but I’d like to highlight a couple that those of us entrusted to look after family wealth might find particularly interesting.

First of all, there are clear gaps between the way that men and women, on average, are thinking about their financial futures. The gender pay gap is much discussed as a major financial barrier for women, and rightly so, but there’s a secondary concern here that often gets overlooked; women on average live longer than men, so they will need their capital savings to power them through a longer retirement.

This disparity might be one of the reasons that only 12 per cent of women feel very confident in their ability to retire on a satisfactory income, compared to 27 per cent of men.

Compounding the issue; and this is something that the industry needs to start grappling with immediately, is that women are far less likely to seek financial advice than men, despite the clear and present need for greater financial security.

It’s interesting that in this day and age financial services is still proving to be more accessible to men than women; more than half of the women we spoke to had never sought financial advice, compared to the majority of men who had done so.

Content from our partners

Why a patient-first approach is key in healthcare

Abu Dhabi: How the ‘capital of capital’ became a magnet for UHNWs

Abu Dhabi Finance Week in the ‘Capital of Capital’

When citing their reasons, many said that they felt equipped to manage their finances themselves, men were more likely to say it was because they feared it would cost too much, while women were more likely to say it was because they wouldn’t trust a financial adviser. In fact, 20 per cent of women said that, and that is a statistic that no-one in the world of wealth management should ignore.

So why else do people who are clearly concerned about their finances, avoid seeking advice? Worryingly, wealth planners told us that one of the most common reasons for putting off planning is that people routinely underestimate the cost of retirement.

Those in our survey felt on average that they’d want around £34,000 a year in income in their non-working years, I wonder how many knew that in order to reach that target they would need close to £1 million in liquid assets?

Another reason, and one which I have personally seen so many times, is clients feeling so embarrassed about the state of their finances that they avoid seeking professional help.

Once again, those of us who work in this industry and see these dynamics playing out time and time again could do more to think about how we can reach the people who need advice the most.

I say this because I know that financial advice works, I’ve seen the money saved, the financial empowerment gained, and the happy retirements afforded by good planning.

Our survey showed the same thing; people who had a financial adviser were twice as likely to be confident about achieving their target savings as those who didn’t, they’re also twice as likely to see the benefits of passing their money on now, rather than waiting for it to be passed over in a will.

I’ll never stop banging the drum for our industry, it’s our job to make sure that both our clients and the wider public are better equipped to enjoy the kind of financial empowerment that they deserve.