The Friends First 2016 Pension Index reveals that 1 in 4 (27%) of all adults don’t know how much the State pension is.
Despite the fact that almost half of the adult population (44%) will depend on the State pension as their only form of income in retirement, the lack of understanding about how much income the State pension provides rises to over one in three (35%) amongst those without a private pension.
The vast majority of those without a private pension (73%) stated that they are not confident of having sufficient income at retirement.
As regards private pension ownership, this remains steady at 45% with the majority of people having made no change to their contributions in the past year.
For the first time, the Friends First 2016 Pension Index conducted a cost of living analysis to compare the cost of living now to people’s expected cost of living in retirement to uncover the gap between perceived financial comfort and the likely reality in retirement (see table below).
This Friends First cost of living analysis reveals that:
- People expect their cost of living to half when they reach their golden years.
- The average cost of living of €19,865 now (€380 per week) is expected to reduce to €9,810 (€188 per week) in retirement.
- For the 1 in 2 that will be dependent on the State pension of €11,960 per year (€230 per week), this leaves a disposable income of just €40 per week which could stretch to a coffee and a newspaper every day.
- The only area of income people expect to increase in retirement is health costs / health insurance, going from an average of €729 per annum to €982.
- When focusing on expected income and expenditure in retirement it is clear that those with a private pension are also over-estimating the level of income their current funding might provide. The respondents average annual pension contribution was €2,946 whereas the average retirement income they expect their private pension to produce is a whopping €19,666 a year.