Member Article

Pensions not factored into retirement plans

Pensions may not be considered as a key source of retirement funding, research from Baring Asset Management suggests.

Just over 1,500 non-retired adults were surveyed on their expectations for retirement, and 44% do not currently expect to use a pension to fund their retirement.

The research suggests that many people are relying on property, cash and even inheritance to fund their retirement.

29% of respondents expect that cash will form part of their retirement planning, an increase from 26% in last year’s survey.

The number that selected property as forming part of their retirement fund also increased to 29%, and 17% expected inheritance to form part of it.

This expectation was more prominent across upper and middle class respondents, as nearly one in four noted assets would form part of their plan.

According to the International Longevity Centre, the average UK inheritance is estimated at £45,000 per person, and Barings suggest many people might be overestimating the role inherited assets may play in helping a retirement fund.

Marino Valensise, Chief Investment Officer at Barings, comments: “It is very surprising to see just how varied retirement funding sources have become for many people in the UK. While diversification is crucial to best-practice asset management, the suitability of some of these sources can be questioned, such as a reliance on inheritance. Overall, the most challenging finding is that nearly half of the adult UK population admit to not having a formal pension at all.”

In a separate question in the survey, respondents gave their views on pension arrangements. This revealed that 11% consider their property as their ‘pension’, and have no other pension provision.

Marino added: “It is astounding that over one in ten people have focused all of their retirement planning on property. This suggests poor planning in terms of asset allocation, and a poor understanding of the risks involved, by large numbers of people in the UK.

“Assets such as cash and property, and instruments such as ISAs and investment trusts, can play an active role in retirement planning if managed correctly. For those people that have put aside assets for retirement, it is critical to make sure that these are allocated effectively and efficiently, properly adjusted for risk and with a clear understanding of the timescale involved.”

This was posted in Bdaily's Members' News section by Tom Keighley .