People are increasingly realistic about their retirement planning and expect to draw upon sources of retirement income beyond traditional employer-sponsored and personal pensions, according to a Watson Wyatt research report, The future of UK retirement savings. This includes one in five who expect that continuing to work after retirement age will provide an important source of income.
The Watson Wyatt survey, which involved canvassing the views of 2,000 employees of large UK private sector organisations, found that employer-sponsored pensions and personal pensions are likely to remain the most important sources of retirement income for most employees, despite growing concerns that such schemes may not be fully meeting employees' expectations.
Some 68 per cent of employees said that employer-sponsored pensions or personal pensions were either 'very important' or 'extremely important' to their income in retirement. However, 53 per cent cited 'other savings' as being very/extremely important, 49 per cent said property would be very/extremely important and 23 per cent said an inheritance would be very/extremely important. Some 33 per cent said state benefits would be very/extremely important while 20 per cent said that continuing to work after retirement was going to be a very/extremely important source of income after retiring.
The research also found that older workers are more likely to rely on the state and pensions, while younger workers are more likely to rely on non-pensions savings, property, inheritance and continued earnings.
'Despite the fall in the value of those pensions directly linked to stockmarket investments, the current financial crisis may, over time, encourage people to value more the relative security and piece of mind associated with employer-sponsored and personal pensions,' said Gary Smith, a senior consultant at Watson Wyatt. 'In recent years, people have increasingly looked to alternative savings or investments - such as property - as a source of funds for their future retirement income. Indeed our survey found that nearly half all employees see property as a source of retirement income. However, our survey was undertaken just ahead of the dramatic falls in property prices in the last months of 2008, and in that short space of time, many will have reconsidered whether property really is 'safe as houses' when it comes to funding for retirement.'