If you had only a 25 percent chance of success at something, would you consider that to be good odds? What if half the people you know had almost no chance of securing enough money for retirement?
These figures are not wildly off the mark, according to a Hymans-Robertson survey. Over half a million employees answered questions about retirement savings in the post-Brexit era (1), and the results were distressing. Only a quarter of savers are on track to meet their retirement goals, and half had only a slim chance, at best, of hitting those goals.
Analysts attribute these dismal statistics to the effects of Brexit.
How Brexit is Affecting Pension Schemes
One reason so many savers are off the retirement mark is that Brexit is causing weaker projections for growth in the UK economy. Another reason is low-interest rates, which cause lower yields for pension schemes.
That does indeed explain why pension schemes may not be performing well in the post-Brexit era. Savers are getting lower yields, and their pensions aren’t performing as well as they have in the past.
But ‘missing the mark’ on retirement goals? How does it get that bad? Most savers are accustomed to seeing dips in their net worth as markets fluctuate and the economy ebbs and flows. But there’s a significant difference between merely ‘seeing less yield’ and actually falling into poverty.
How is retirement poverty defined, anyway?
How Pensioner Poverty is Defined
The government maintains an ‘acceptable level of retirement income’ deemed appropriate for retiring. Think of it as a poverty line for pensioners. The Department for Work and Pensions maintains the figures, and right now 75 percent of people are expected to miss the mark, according to the survey cited earlier.
Some savers with UK pensions are in even worse straits: 50 percent of Brits have an ‘extremely low’ chance of making it above that ‘pensioner’s poverty line’ with the way things are going right now.
What Should Savers Do?
According to pension experts, savers will have to increase the amount they save by 22 percent in order to meet retirement goals. That is the root cause of the post-Brexit anxiety for savers and pensioners.
Saving more will help, but that’s not the only strategy savers can take. In addition to beefing up their pot with more money, savers should take a long-term view of their savings strategies. Then, they should formulate a smart plan that they can stick to.
What About Expatriate Pensioners?
For expats who invest their pensions overseas, the effects of Brexit might tend to be mitigated. After all, much of the reason for the dismal retirement projections are based on growing speculation in the UK economy.
While interest rates are low in the United States as well, pensioners who make informed decisions about investing their money can, in some cases, reap some rewards.
Here’s the Bottom Line
The bottom line: there’s never been a better time to pay close attention to your investing strategy and take a long-term perspective. For British expats living in the United States, sound advice from a qualified adviser can go a long way toward helping you reach your retirement goals.
Tim Carroll has been helping British expatriates since 1981, providing research for clients’ existing pensions free of charge. Now might be the time for you to consider a free pension review — call Tim to get started.
- Brexit Set to Push Retirement Affordability to the Brink. Retrieved 5/20/2017 from https://www.hymans.co.uk/news-and-insights/news-and-blogs/news/brexit-set-to-push-retirement-affordability-to-the-brink/