Younger adults believe they will need substantially more income in retirement than older generations, with new research putting the average UK expectation at £42,456 a year after tax.
The YouGov research for Mattioli Woods found that UK adults estimate they would need an after-tax household income of £3,538 a month, equivalent to £42,456 a year in today’s money, to feel financially secure and live comfortably in retirement.
However, the figure rises to £4,606 a month, or £55,272 a year, among 18 to 24-year-olds. Those aged 55 and over put their requirement at £3,021 a month, equivalent to £36,252 a year — a difference of £19,020.
REGIONAL GAP
There is also a wide variation between different parts of the country. London has the highest expected retirement income at £4,441 a month, or £53,292 a year.
People in the West Midlands estimate they would need £3,868 a month, equivalent to £46,416 a year, while the figure for the South East is £3,699 a month, or £44,388 a year.
Expectations are lowest in the North East, where respondents put the income required for a comfortable retirement at £2,686 a month, equivalent to £32,232 a year. That is £21,060 a year below the figure given by Londoners.
Across the UK, respondents expect to retire at an average age of 65. Those in the South East and South West anticipate working until 67, while Londoners expect to retire at 64.
COST PRESSURES
Living and housing costs emerged as the most commonly cited threat to long-term financial security, identified by 40% of respondents. Unexpected health or long-term care costs were cited by 39%, while 33% were concerned about being unable to work or losing income.
Running out of money in later life was a concern for 26%, with 25% pointing to unexpected major expenses or financial responsibilities towards their family.
Amit Joshi, managing director of wealth at Mattioli Woods, said: “Our research highlights the very different expectations people have about the income they will need to feel financially secure in retirement.
“While the average figure stands at more than £42,000 a year after tax, the substantial differences between age groups and regions show that retirement means different things to different people.
“There is no one-size-fits-all retirement income target. The amount someone needs will depend on their circumstances, financial commitments and the lifestyle they hope to enjoy.
“Understanding those individual needs is key to building a realistic picture of what financial security in later life could look like.
“With more than a quarter of people concerned about running out of money in retirement, it is important to look beyond a headline figure and consider how income, savings and wider financial plans can support the retirement someone wants.”
