Average UK pension pot
According to one of the top pension providers in the UK, Aegon, the average value of a pension pot in the UK is currently around £50,000 with men having an average savings value of £73,600 and women with a savings value of £24,900. These figures relate to the cash value of defined contribution savings rather than Final Salary Pension Scheme funds which are pension investment assets with associated long-term liabilities (not separate pots of money with each member’s name on it).
The reason the average pension pot value for women is considerably lower than for men is because many women left paid work to have children and historically, they were generally paid less than men and therefore, were less able to contribute. Lower-income also means lower employer pension contributions.
Average pension pot values also vary considerably by county with Surrey averaging £88,000 and Avon, the lowest, averaging £35,000. Many self-employed people are not saving anywhere near enough for a comfortable retirement and, without the right level of National Insurance credits, will not be receiving the full state pension when they reach their state pension age.
Something is better than nothing and starting retirement savings as early as possible has fantastic monetary benefits when the effect of compounding positive returns comes into play over several decades of saving. It is worth noting that advice on pensions must only be given by those who are appropriately authorised and regulated to give pensions and investment advice.
Getting good financial advice from an adviser regulated by the Financial Conduct Authority is a proven way of improving the chances of ending up with a decent level of personal pension with the right level of annual income needed. Add to this a full state pension and the result should be a comfortable retirement at the desired retirement age.
Until Auto Enrolment became mandatory, many employers and employees were not contributing to their employees’ workplace pension. In fact, it is only relatively recently (in April 2019) that the minimum total contribution of the employer/employee rose to a minimum of 8% of salary.
This is not 8% of the full gross salary. If the salary exceeds the upper limit set by Auto Enrolment rules (subject to being changed by future legislation so not stated here) then the minimum amount will be lower. That being said, being auto-enrolled in an employer’s scheme should be a no-brainer unless your pension pot is so large it causes you a problem with your protected Lifetime allowance (if you are lucky enough to have this).
Pension savings attract valuable tax benefits representing a big boost to this method of saving versus using an ISA or putting your cash in the bank. In effect, your contributions are allocated from your gross income in full and any growth is tax-free. There are annual limits (£40,000) and lifetime limits (£1,073,100) but this does not usually affect the average person as you can see by the average UK pension pot size stated in this article.
As ever, getting good financial advice is key to implementing the right (suitable) investments for you whether these are for accumulating or decumulating your retirement savings. Putting together a bespoke plan is what Financial Planners excel at and the cost of creating your personal lifetime financial plan should be just a small fraction of the total monetary and wellbeing benefits you will harvest year after year.
Your financial plans should be reviewed on a regular basis to take account of changes that happen in your life as well as changes that occur in the economy and to take account of any changes in legislation or new regulations that might affect your long-term financial wellbeing. Doing nothing and leaving this to chance is unlikely to result in the best possible outcome and is therefore, more likely to result in a lower quality of life in retirement than desired.