Pension shortfall could force future retirees to change their retirement plans

Are you confident that you'll have enough money over the course of your retirement?

Research by Nationwide has found that retired people need an average of £885 a month -- almost £400 more than the state pension.

Yet just four in ten (40%) people in middle age have a private pension, and one in three (33%) expect to survive solely on their state pension.

Those polled already in retirement aged 60 and over said they receive £505 a month in state pension on average but require £885 a month to live on -- £616 for essential bills and £269 discretionary spending. For those without an additional pension to take them beyond the basic state allowance, this leaves a shortfall of £380 a month, or £4,560 a year. Over an average 15-year retirement the shortfall would amount to £68,400.

As a result, many people could be forced to abandon plans for travelling, moving home or supporting their children and grandchildren.

More than half (52%) of people aged 40 to 60 said they are worried about having enough money in retirement, and four in ten (43%) don't believe they will be able to afford the lifestyle they want when they finish work.

Many are reluctant to consider equity release to help fund their later years, however.

The survey found that those in middle age have an average of £125,350 equity currently in their home but would try to find other ways to survive before tapping into their property wealth. Around a third (32%) see accessing equity in their property as a last resort, while more than a fifth (28%) don't want to leave any debt to their family. A quarter (24%) wouldn't know who to approach if they needed advice on their retirement.

Jason Hurwood, Nationwide's director of Home Propositions, commented: "We are living longer and need more money to keep us going. The reality is that without adequate income, and potentially living a third of our lives in retirement, older people risk missing out at a time in life when they want to relax and enjoy themselves. As an industry we really need to do more to help people access their money in later life and it is something we are continuing to explore.

"Options should be varied; we can't presume releasing equity in the home is the solution for all older people with limited income, despite healthy average levels of equity. There needs to be more education and support so that people can take charge of their own futures and pick the option that is right for them and their circumstances. Recalibrating the relationship between our money, our expectations and our assets is key to unlocking a retirement that is comfortable."