Rude awakening for pensioners of tomorrow

RUDE AWAKENING FOR PENSIONERS OF TOMORROW People currently in their 40s and 50s will face a massive pension shortfall when they reach retirement, according to new research by comdirect, Europe's biggest stockbroker. The new research has found that this age group believe that they will be able to retire comfortably on a lump sum of £192,000 - however IFA's¹ believe the actual amount required is a staggering 250% more, or approximately £700,000. The findings come at a time when many companies are abandoning their final salary schemes and the state pension has fallen alarmingly in relation to average income. While much has been written about the pension crisis facing those in their 20s and 30s, for those in their 40s and 50s who have a shorter period in which to invest their money and have additional financial burdens such as children, mortgages and other commitments, the findings suggest that this age group have to act now or resign to a less comfortable life in retirement. Taking a closer look, a lump sum of £192, 000 would provide a gross annual income at the age of 60 of a mere £22,888 per annum², which in 20 years time, once inflation and rate of earnings are taken into consideration, will provide a very limited income in retirement. Compared to calculations made by Independent Financial Adviser, Torquil Clark, ideally, someone in their 40s, looking to retire at 60 would need to have a lump sum of £300,000, which invested over 20 years and assuming an investment return of 6% per annum would produce a lump sum of £700,000. Based on an income at 5% this would provide a gross annual income of £35,000p.a. comdirect asked 1,000 people what they think they need to save in order to retire comfortably at the age of 60. Key Findings: · Many women are heading towards poverty in old age, with two in five (40%) compared to one in four men (25%) claiming to have no idea how much money they might need to save for retirement. · Young Britons remain in the dark over their retirement needs with 16-24 year olds estimating that they will only need an average of £157,265 to retire comfortably at the age of 60. 25-34 year olds do not look to be any better informed with this age group expecting to retire comfortably on a lump sum of just £174,000. · Worryingly, those who don't have any pension provision in place believe they would need to save the least, only £137,000. · Scots are the least aware, believing they need less than half (46%) of the amount Londoners need for retirement (£97,000 v £207,000) Around the regions Region How much they need to save to retire comfortably at 60? London £207,697 North £140,901 South £207,430 Midlands £135,429 Scotland £97,232 Wales £133,476 John Glendinning, Managing Director, comdirect, commented:" It is very concerning that a huge majority of people have no idea how much they need to be saving for retirement. Whilst much has already been done to raise awareness of the need to save for retirement, there is a further need to educate people to think about putting away some money now for the future. Investing an amount in an Isa each month for example will help build a lump sum of money which will be available in later years to supplement their pension." Phillipa Gee from Torquil Clark said:" The research highlights in particularly the problem among 40 and 50 year olds. While youngsters have time to save and wake up to the fact that they will increasingly have to provide for themselves, those in their 40s and 50s, many of which already have additional financial commitments such as children, mortgages, have less time to accumulate the money they will need for a comfortable retirement." -ends- Notes to Editor ¹ Based on statistics provided by Torquil Clark ² £192, 000 based on RSGB Omnibus figures for comdirect, additional calculations provided by Torquil Clark For further information, please contact: Rebecca Ellis-Owen/Caroline Long Financial Dynamics 0207269 7112/7269 The research was undertaken for comdirect by RSGB, a division of the Taylor Nelson Sofres Group among a GB representative sample of 1,000 adults. Facts about comdirect · Europe's biggest stockbroker, comdirect is majority owned by Commerzbank, which also owns Jupiter, one of the UK's leading fund providers. · comdirect is one of the fastest growing stockbrokers in the UK - won 70.3% of all net new online brokerage clients acquired by UK execution only stockbrokers in Q3 2001 (ComPeer's 3rd Quarter Report 2001). · Fair deal pricing: flat fee of 12.50 per trade by phone and online for all account types - investment clubs flat fee of £7.50 per trade. · No annual account fee for dealing accounts. · Access to the UK and 18 international markets in Europe and North America, plus gilts, unit trusts and investment trusts, and Exchange Traded Funds · Price improvement: 80%+ of all trades are executed at a price better than the London Stock Exchange price. · comdirect has a UK market leading platform in terms of speed of execution and sophisticated portfolio management tools, for example limit orders and stop orders. · Immediate trading - straight through online application and funding process enables an account to be opened, funded and ready to trade typically within 10 minutes. · Only stockbroker to offer zero commission on Exchange Traded Fund tracker purchases in self-select ISAs. · Embraces the highest standard for online security - 128-bit encryption. · Telephone orders for UK shares can be placed 08.00 to 16.30 Monday to Friday and for international shares 08.00 to 21.00 Monday to Friday.comdirect is one of the fastest growing stockbrokers in the UK - won 70.3% of all net new online brokerage clients acquired by UK execution only stockbrokers in Q3 2001 (ComPeer's 3rd Quarter Report 2001). ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/04/30/20020430BIT00460/wkr0001.doc http://www.waymaker.net/bitonline/2002/04/30/20020430BIT00460/wkr0002.pdf