High earners in the South East should have a pension deficit warn wealth managers

Nearly half of high earners in the South East are not investing enough in their future while many underestimate the amount they need for retirement, a wealth management firm has warned.

Meanwhile, those aged 35-44 are under particular financial pressure, due to competing savings priorities that force them to choose between their own retirement, their children’s future and long-term spending commitments. short term.

Brewin Dolphin’s ‘Relationship with Money’ report collated the results of 2,000 interviews with people in the South East earning over £50,000, as of February 2022.

The income of this demographic puts them in the richest 9% of the UK adult population, and up to 32% of those polled described themselves as ‘confident’ in their attitude towards the workplace. ‘silver. Only 6% said they were “not confident”.

However, the report showed that people seemed to make a distinction between current money management and investing, with 48% not investing, while 59% either didn’t think or weren’t sure they had enough funds. pension to retire comfortably.

The average amount respondents thought they would need for a comfortable retirement was £506,000, but high inflation could mean a much larger pension pot was needed in 10-20 years.

Meanwhile, respondents estimated that they would not be able to retire before age 64, compared to their ideal retirement age of 58.

According to Brewin Dolphin’s calculations, to retire at 64 with a pension pot of £251,000 with enough savings to last into 90, a person would need to limit their retirement income to just £13,500 a year. year.

Even at the higher end of the scale, a £500,000 retirement pot would produce an income of £26,500 a year until age 90. This assumes that their pension fund grows by 5% per year after charges and that the income increases each year with inflation.

If they are entitled to full state pension, that would add around £9,600 a year in today’s terms, bringing the totals to just over £23,000 and £36,000, respectively – but still significantly lower than the annual income of over £50,000 that top earners were accustomed to. at.

Brewin Dolphin financial planner in Tunbridge Wells, Lee Clark, acknowledged it would be a difficult adjustment.

“Telling people to save for retirement is a very difficult message right now.

“The cost of living crisis is just beginning to be felt and many people have run out of money after buying food and paying their bills. We know that many people cannot afford to save for their retirement.

However, this could be a particularly difficult balancing act for 35-44 year olds, warned Brewin Dolphin.

The survey showed that a financially pinched age group was torn between saving for retirement, their children’s future, specific purchases or projects and ‘rainy days’.

Sounding a warning to the wider population, Brewin Dolphin CEO Robin Beer added: ‘The fact that our research has focused on high earners – who one would expect to be better prepared than the population general – suggests that we face a larger societal problem in terms of saving for the future.

“With the cost of living continuing to rise, it’s hard to save more today. Yet, if we are to envision a financially secure future, it is essential that we find ways to strengthen our finances for the long term.

Dolores W. Simon