Big retirement plans? Some won’t be rich enough for a haircut!

THOSE who put money away into a pension have high hopes for their retirement – drinking fine wines, enjoying a sunny getaway or driving a fancy car.

But that appears to be a pipe dream according to the pensions industry, which is warning that workers who fail to save enough could be left unable to fix a leaky roof – or even pay for a haircut in their latter years.

A major report calls for savers to be given a set of lifestyle targets they want to achieve for their retirement.

An estimated 30.4million workers are not saving enough to fund the old age they dream of, the report by trade body Pensions and Lifetime Savings Association (PLSA) said.

It found that many people fail to understand how much they need to put aside every month to fund their retirement.

The PLSA said the UK should look to Australia, which highlights the type of retirement different savers get. A warning sent to Australian savers describes how those relying on the state pension would be unlikely to afford a car, have only basic clothing, no money to fix a leaky roof, and even have to rely on friends to cut their hair.

A ‘modest retirement’ would offer an occasional meal out, but an older car and no budget for home improvements.

Meanwhile, those chasing a comfortable retirement would eat out regularly, have the latest electronics, own a reasonable car and drink pricier wine.

Tom McPhail, of investment firm Hargreaves Lansdown, said: ‘You can’t expect savers to hit a target if they don’t know what they’re aiming at.’ He added that the proposal to develop targets ‘ will enjoy widespread support’.

Since 2012 the UK’s largest firms have automatically enrolled employees in workplace pension schemes.

But while £4.3billion more was paid into pensions in 2017 than the year before, there are concerns that people are still paying too little.

The minimum amount is currently 5 per cent, where 2 per cent comes from savers and 3 per cent from the employer. From April 2019 this can be increased to 5 per cent, with employers adding extra 3 per cent. Most experts recommend savers ideally put aside 10 per cent. As millions face a retirement living off the state pension of £164.35 week, the PLSA has proposed a set of ‘Retirement Income Targets’.

Nigel Peaple, of PLSA, said: ‘ It’s vital more is done to ensure people can cover the costs of later life.

‘We want the Government, pensions sector, and regulators to work together to take forward our recommendations and help many more people achieve the retirement they desire.’ The PLSA expects to identify the targets by early next year.