Relying solely on the State Pension to financially support you in retirement is extremely dangerous. The number of British pensioners living in poverty has exploded over the past decade as the ballooning cost of social care has outstripped the rate of annual State Pension rises.
Things threaten to get even worse given the huge stress that Covid-19 has placed on the public purse. The pace of future State Pension hikes is in jeopardy as calls to scrap the ‘triple lock’ mechanism grow.
Also, the age at which Britons can claim retirement benefits has been steadily rising in recent years. And it’s likely to keep getting further away as the government struggles to balance the books.
11.1m heading for retirement poverty?
It’s clear Britons need to take action like buying UK shares in a Stocks and Shares ISA to protect their standard of living in retirement. Yet very few citizens are taking the necessary action to build a financial buffer for their autumn years.
Research just released by investment specialists EQi reveals the extent of the problem in Britain today. It shows a staggering 18m people have never reviewed their pensions or retirement plans.
Yet this wasn’t the most shocking result of the survey. Of the 2,000 adults which it questioned, EQi says that “29% of people surveyed are either fairly confident (16%) or very confident (13%) they will not be able to save enough for their retirement.”
This is equal to a staggering 11.1m people in the UK.
Offsetting the poor State Pension with UK shares
It doesn’t have to be that way though. With a little research and a commitment to regular investing it’s possible to not just avoid poverty in retirement. You might actually build a handsome nest egg to help you live the Life of Riley once you ditch your work gloves.
Studies show that the long-term UK share investor makes an average annual return of between 8% and 10%. This means someone who invests £350 a month can, after 30 years, expect to have built a retirement fund of at least £492,000. At the top end, they can realistically expect to have made close to £723,000.
These proven rates of return mean Britons don’t have to pull their hair out worrying about retirement. They also mean those who are closing in on retirement can build a healthy sum of money to live on once they’ve stopped working.
Let’s say you’re aged 50 and hope to retire by 66. That £350 a month invested in UK shares could have made you as much as £157,000, based on those previous rates of return.
I’m financially preparing for retirement with a tax-efficient Stocks and Shares ISA. I’ve continued to buy UK shares in 2020 despite the uncertain economic outlook too.
As those figures above show, long-term investors can still make BIG returns despite temporary trouble for the global economy. And those that invest today can pick up some terrific bargains following the 2020 stock market crash.
