High-earning Scots are heading for retirement crisis, new study claims

Many highearning Scots are heading for a retirement crisis, according to a new report.

Wealth manager Brewin Dolphin studied the financial habits of those earning more than £50,000 and found their relationship with money is far from perfect.

Higher earners describe themselves as confident with money, but 52% in Scotland do not invest – and many are underestimating how much they need for retirement.

More than half (58%) don’t believe or aren’t sure they will have enough in the pension pot to retire comfortably on.

Brewin’s Relationship with Money report was commissioned in order to understand more about people’s attitudes to their money and how they intend to use it to support their futures.

The report highlights a “severe lack of knowledge” around what is required for a comfortable retirement. The report found that:

● High earners are not as good with their money as they think they are

● They are also letting their money stagnate

● Even the wealthy could be heading for a retirement crisis

● High earners aged 35 to 44 are juggling many financial pressures

Brewin chief executive Robin Beer said: “The fact our research focused on higher earners, who one might expect to be better prepared than the general population, suggests we are facing a wider societal problem in terms of saving for the future.

“With the cost of living continuing to rise, saving more today is a tough ask. Yet if we are to look forward to a financially secure future, it is vital that we find ways to bolster our long-term finances.”

Brewin found many higher earners do not see investing or long-term saving as part of their money management, but as something separate.

The firm found Scots mostly value money for its ability to provide security and peace of mind (44%).

Scots earning more than £50,000 would ideally like to retire at 57, but this is out of kilter with reality by seven years.

Based on people’s current financial planning, survey respondents don’t expect to be able to retire until they’re 64.

Scots who took part in the survey typically believe they will need £535,000 for a comfortable retirement.

Brewin added: “While over half a million pounds for those retiring today seems to be a reasonable figure, high inflation could mean that in 10 or 20 years’ time, the amount people need is significantly higher.”

According to Brewin, someone who retires at 64 with a £251,000 pension pot and wants their savings to last to age 90 will have to limit their retirement income to just £13,500 a year.

Even at the upper end of the scale, a £500,000 pension pot would produce income of £26,500 a year to age 90.

This assumes their pension fund grows at 5% per annum after charges and the income increases annually with inflation.

If they qualify for the full state pension, this would add around £9,600 a year in today’s terms, bringing the totals to just over £23,000 and £36,000, respectively – significantly lower than the £50,000plus a year that higher earners are accustomed to.

Brewin financial planner Thomas O’Brien said: “Confusion reigns around how much is needed for retirement, with even higher earners at risk of falling short of their goals and running out of money in later life.

“Ideally, we would advise clients to have six months’ worth of expenditure in a rainy-day fund, but it’s important to remember there is no one-size-fits-all approach.

“It all depends on what is right for your individual circumstances, which an adviser can help you with.”

LONG-TERM: Scots who took part in the survey typically believe they will need £535,000 for a comfortable retirement.