13/12/2011
By Ilonka Oudenampsen
Maintaining and increasing their current standard of living into retirement is a top priority for 42 per cent of affluent European investors, but nonetheless they are facing a retirement with only 46 per cent of their current income, Schroders European Wealth Index found.
Across Europe, respondents would like to live on a high level of income in retirement. On average this was 62 per cent of their current income, rising to 75 per cent in the Netherlands and 77 per cent in Sweden.
However, they estimated they need a pot of €475,862 to have this level of retirement income, which is well short of the more realistic minimum target of €645,000 they would need based on the proportion of current income investors said they would like to have in retirement.
While Swedish investors would like to retire on 77 per cent of their current income, their pension pot predictions would give them a retirement income of just 45 per cent of their current income. In Spain, France, Belgium, the Netherlands and Italy investors predicted a pension pot that would give them a retirement income that was less than 40 per cent of their income level, despite most of them wanting a retirement standard of living that was between 65 per cent and 70 per cent of their current household income.
Alan Brown, chief investment officer at Schroders, said: "With defined benefit pensions now a rarity, individuals are increasingly being made responsible for their own retirement provision. Whilst there are many factors which influence the amount of money people need to accumulate to enjoy a comfortable retirement, these latest findings suggest many investors are calling it short.”
There was a “yawning gap” between retirement income needs and the size of individual savings pools, Brown said.
“Unless this gap is bridged quickly we risk a retirement tragedy where individuals have to work longer, retire poorer or both. The role of an independent financial adviser is therefore even more important in ensuring investors are working to a target retirement fund that is realistic and aligned to their lifestyle goals for the future."
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