Opinion: Uncomfortable home truths about being retirement ready

Blacktower Financial Management Group report showing maps of areas that have saved most for retirement

A report prepared by Blacktower Financial Management Group shows which areas have saved most for retirement, with Norwich in fifth place - Credit: Blacktower Financial Management Group

My wife and I have been enjoying a regular weekly treat: watching series one of The Sopranos for perhaps the third or fourth time, reminding ourselves that it remains, without question, the finest television drama ever. Fortunately, we saw every episode when they were first broadcast and were hooked from day one, but watching again, you still pick up comments and nuances you may have previously missed.

Earlier this week, we saw Carmella Soprano deliver a succession of withering home truths to Father Phil, the priest who had regularly taken advantage of her hospitality. The cleric had no defence to Mrs Soprano’s crushing comments and remained speechless as he meandered to the front door, closing it softly behind him. It was a formidable scene that served to emphasise how powerful home truths can be.

The day after watching this potent drama, I received a report prepared by Blacktower Financial Management Group, the content of which was no less formidable, except for the fact that the financial home truths that leapt from it applied to real life, not the television screen.

The report confirmed that if you plan on living your retirement years without worrying about finances, then pension saving is a must. The italics are mine.

“Millions of employees work tirelessly for decades in the expectation of a comfortable retirement in the future,” says the report, “but for many UK residents, retirement is an event to be feared due to [their] lack of savings and pension.”

Blacktower’s figures have been well researched, assembled from the Office for National Statistics and the UK Pensions Regulator, as well as from other government departments and reputable financial organisations. In every respect, they’re comprehensive, heavily laden with financial home truths.

The report and the uncomfortable home truths it contains are timely because over the past 18 months, we’ve grown accustomed to the state taking care of everything – or at least trying to – with limited success. Money has been printed or borrowed to keep the economy afloat (just about every nation on Earth has done the same) and to keep citizens protected from the pandemic’s brutal fallout. But this arrangement must come to an end and the money repaid at some point.

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The same is true of pension saving: although many people may wish for the opposite, the state simply does not have the capacity to fund pensions for everyone ad infinitum, especially as the population ages and comparatively fewer workers contribute to the state pension pot in the form of National Insurance contributions – an income tax by any other name.

An alternative exists, but it could hardly be described as a comfortable or palatable option. Then again, home truths rarely are.

Blacktower’s report reveals that those deemed to be part of Generation X (i.e. born between Baby Boomers and Millennials), “need to have saved £330,330 to retire on an income of £23,595 a year” – the sum required to live comfortably in the future.

On the other hand, the report maintains that “Millennials in their early thirties should have already put away more than £70,000 if they want a stress-free and happy retirement.

“Even 25-year-olds with an average of just a year of full-time work under their belt need to have already saved £15,745, regardless of what else they are paying for,” according to Blacktower.

“In reality,” adds the report, “Britons aged under 34 have only saved around £1,000 for retirement.”

Edinburgh tops the list of UK cities where, in percentage terms, more people have saved adequately for retirement. Nevertheless, although 18% of residents have saved at least £330,330, it means that more than 80% have not. Norwich is fifth in this ‘retirement ready’ table.

The least prepared cities include Liverpool, Bristol, Cardiff and Birmingham where almost one third of people have saved nothing.

The report offers several tips designed to help people save for retirement. Creating a budget and following it is a simple first step. Being open with your spouse or partner about how you can both save is another, while prioritising your pension is an excellent longer-term goal.

The 19th-century philosopher and political economist John Stuart Mill wrote: “There are many truths of which the full meaning cannot be realised until personal experience has brought it home.”

No-one wants to be hit with an uncomfortable home truth, but most of us still have time to do something about our underfunded pensions. Doing nothing and realising in later years that you have not saved enough for retirement would be even worse than Father Phil’s uncomfortable discovery in The Sopranos.

The report can be read in full here.

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