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The average UK household is, on average, £31,546 short of the amount needed to maintain a moderate standard of living in retirement, Hargreaves Lansdown’s Savings and Resilience Barometer has revealed.
The research also found that the percentage of households on track for a moderate retirement has fallen to 36.4 per cent, down from 38 per cent six months ago.
Commenting on this, Hargreaves Lansdown’s head of retirement analysis, Helen Morrisey, said: “Retirement resilience has dropped from 38 per cent just six months ago to 36 per cent, with middle to low-income households hardest hit.
“This is due to rising inflation boosting the amount of money needed for a moderate retirement, with the pension gap opening up to £31,546 – four times more than it was in 2019.”
However, she proposed several solutions to close the gap, including the government’s ongoing Pension Review, which aims to deliver better outcomes for members.
In addition to this, she emphasised that efforts to reduce lost pensions and addressing the issue of the growing number of small pots could ensure “much needed” pension savings do not go astray so people know how much they have.
“We urge the government to continue to look closely at the potential of the lifetime pension to boost engagement as well as competition in the industry,” she continued.
“The ability to choose the pension provider that you want your contributions to be paid to throughout your career could really boost people’s retirement planning.
“It would be far less likely to be lost as you change jobs and gives people an overarching view of what they have which can aid better decision making.
“You will approach one larger pension pot in a very different way than you would several small pots which you might be tempted to simply take as cash and spend.
“The lifetime pension could do much to reduce complexity for the member while ensuring providers give better value.”
Morrisey also suggested that increasing auto-enrolment minimums beyond the current 8 per cent was an option but emphasised that this “should not be implemented without consideration of the impact it would have on people’s short-term financial resilience”.
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