'Worrying': Poverty fears for Scots with insufficient pension savings to live off

And the study by Standard Life Aberdeen has found that 66% of 2021 retirees in Scotland risk not having enough for what they need when they stop working.

The research which examined people's pension pots against their spending aspirations found that a 2021 retiree in Scotland planned to live off £21,331 a year in retirement – almost £10,000 less than the average UK household income (£29,900).

It comes as the study found that more than a third (37%) of people who are close to retirement have accelerated their plans due to the coronavirus pandemic.

Brian Sloan, chief executive of Age Scotland said the study was "worrying" and said employers have a responsibility to help and support staff to better understand their retirement plans and savings.

The charity was concerned that there are already 150,000 pensioners in Scotland living in poverty and thousands more on the cusp.

It said women tend to have 40% less pension wealth than men and have faced "significant disadvantage" in being able to properly save for retirement.

John Tait, retirement advice specialist at Standard Life Aberdeen, said: "Our research found that two thirds of Scots don’t have the pension assets needed to provide this level of spending throughout retirement and therefore risk running out. Retirement is a marathon, not a sprint, and many could be going into it without sufficient preparation or planning."

The analysis, factored in money they would receive from their State Pension, found that one in three admitted to having less than £100,000 saved.

“Pension pots are without a doubt the most popular option for funding retirement, but it’s so important that retirees consider any other savings or assets they can use when deciding whether they can afford to retire or not.”

Based on a planned average planned spend of £21,000 a year, a retiree would need around £390,000 in savings on top of their State Pension income to cover their expenses over the course of a 30-year retirement.

The research found that those retiring this year have spent just five years planning and preparing to retire.

More than half (55%) have spent less than two years, while almost one in ten (7%) have done no planning whatsoever.

And those that have failed to plan for their retirement are more likely to have concerns about money, with more than half (55%) worried about not having enough money to live on.

Mr Tait added: “Understanding what money you have for your retirement and how to spend it wisely can be hard, but that’s where preparation and speaking to an expert can help. Circumstances or priorities may change, particularly if you’re retiring amidst a global pandemic, but it will be much easier to adapt a plan you already have, than if you were to have to start from scratch.”

According to the study, lockdowns, health worries due to the pandemic and job uncertainty were the three main reasons for speeding up retirement this year.

Women who are close to retirement were less likely to feel confident they are financially ready to finish working than men.

Age Scotland said their Planning For Your Future workshops which have dealt with 3500 people found that many participants said on reflection that they should have begun looking at retirement options and pension savings a decade earlier, rather than just two year before they planned to stop work.

Mr Sloan said: "The report demonstrates the importance of supporting workers to plan for retirement much earlier in life than tends to be the norm."

“It’s important to encourage honest and open discussions about retirement and ensure that those planning have access to independent and impartial advice on money matters including pensions. Employers have a responsibility to help and should be supporting staff to better understand their retirement plans and savings with access to courses, advice and workshops.

“A trigger for this support should be when someone reaches 50, so there is enough time to adapt plans, increase contributions and better understand what the future holds.

“Saving for retirement should start early and over time contributions should increase, but that is often easier said than done. Discussions can focus on when people ‘choose’ to retire, but it’s important to remember that this is only a choice for people with savings.

"Life gets in the way, with housing costs and mortgages, childcare, debt, low income, unpaid caring responsibilities all combining to make doing what people want and need to do, much more complicated.

“There is no doubt that older workers have suffered a significant blow in this most recent economic downturn as the group second most likely to face redundancy. For older workers, finding another job after being made redundant is often an uphill struggle and, with so many jobs lost in the past year, tens of thousands are now facing difficult financial decisions.

“For example, those tempted or forced to dip into their retirement savings much earlier than planned in order to bridge the gap will face a much longer period of their life on lower retirement income – a problem compounded by the inability to make pension contributions during this time.”

It comes as a study conducted by Profile Pensions found that women are at risk of receiving retirement incomes thousands of pounds lower a year than men.

The pensions expert analysed its own internal data from more than 20,000 customers aged 22 to 66 to see which areas of the UK had the largest pension gender gaps.

Throughout the UK, there are significant differences in pension value, with women in some areas of the country retiring with a pension pot that’s nearly half the size of men.

But it found that northern Scotland is where the pension gender gap is widest. There, men’s pension pots are almost 50 per cent bigger than those belonging to women. The average value of men’s pensions in this area is £41,603, nearly double the size of the average woman’s pension value, standing at £20,978.

When looking at the Scotland as a whole, the average male pension has a value of £38,931, compared to £21,436 for females - a difference of 45% or £17,495.

The UK region featuring the lowest pension gender gap is Greater London, where the average female pension pot is 30 per cent higher than the female national average.

Michelle Gribbin, Chief Investment Officer at Profile Pensions, said: “What we see with these findings, sadly, is that the gender pay gap and the gender pension gap go hand in hand."

Helen Morrissey, pension specialist at Royal London, added: “The pandemic has caused so much uncertainty with some people deciding to retire sooner than they otherwise would have. While some people will be able to plug gaps in their retirement income by working part time, others will not be able to do so and may have to make cutbacks to make their money last.”