Britons are warned of a “perfect storm” that could see them lose almost £75,000 in retirement.
The financial impact of delaying retirement savings can be costly, with research showing a potential £72,644 difference in pension pot size based on starting age.
According to Nucleus’ analysis, someone starting to save £100 monthly from age 25 could accumulate approximately £159,818 by the age of 65, assuming a five per cent investment return.
In contrast, waiting until age 45 and contributing £200 monthly would result in just £87,174 by retirement age.
They will still have contributed the same amount by age 65 but the pot size is likely to be significantly smaller.
Britons are urged to consider starting early as smaller monthly contributions can lead to significantly better retirement outcomes through the power of compound returns.
Britons are urged to consider starting early as smaller monthly contributions can lead to significant savings
Getty
Andrew Tully, Technical Services Director at Nucleus, said: “One message that comes through loud and clear from our findings is that people need to start planning and saving for later life much, much earlier.
“Its certainly what our over-50s would tell their younger selves and hopefully what they are telling their children and grandchildren.
“But while the desire is there, many people don’t seem to know where to begin and are finding it difficult to think about the longer-term when they have other more immediate problems to contend with.
“Part of that is due to a lack of understanding, which shows a real need for better financial education to put adults on a good footing.”
According to the Nucleus study, 22 per cent of adults believe they would need between £20,000 and £30,000 annually for a comfortable retirement. However, this falls substantially short of expert recommendations.
The Pensions and Lifetime Savings Association (PLSA) estimates that an individual requires an annual income of £43,100 to achieve a comfortable lifestyle in retirement.
There is a big difference between expectations and recommended income levels, which is particularly concerning given that retirement funding typically relies on a combination of state pension, private pension, and other savings.
The report suggested that many Britons may be significantly underestimating their future financial needs.
Tully warned of a “perfect storm” facing future retirees, with people potentially underestimating both their financial needs and longevity.
Those who feel more confident about retirement, typically have a clear plan and seek quality financial advice.
He said: “The road to a financially secure retirement is paved by making the right choices at the right times. We need to help lay the foundations, so people are ready to take the first step.
“With people potentially underestimating how much they will need, not appreciating how long they might need it for and not saving anywhere near enough, future retirees could be facing a perfect storm.
“Its in all our interests to get the message out there: when it comes to retirement planning, if you didn’t start yesterday, then today is the next best day.”
With proper planning and early action, Britons can avoid the significant financial shortfall that delayed saving could create.