The UK ranks 19th globally for retirement security. Here’s why and what you can do

Category: News

How do you think retirement in the UK compares to other countries? According to a report in the Telegraph, the UK ranks 19th, falling behind the likes of Australia, Germany, and Ireland. Read on to find out why and what you can do to overcome the challenges UK retirees face.

The research incorporated several factors for assessing how comfortable and secure retirement is. Among the areas measured were the quality of financial services, a pensioner’s ability to preserve their savings, access to health services, and general living conditions.

In a list of 44 developed countries, the top 10 places to retire are:

  1. Norway
  2. Switzerland
  3. Iceland
  4. Ireland
  5. Australia
  6. New Zealand
  7. Luxembourg
  8. Netherlands
  9. Denmark
  10. Czech Republic

While the UK fell behind these countries by ranking 19th, it did place higher than France and came just behind the United States.

3 reasons UK retirement is falling behind

The research suggested that retirement prospects in the UK have fallen in the last five years. Among the reasons were these three.

  1. Rising tax burden

The tax you pay in retirement will have a direct effect on your income. So, ensuring you’re creating an income tax-efficiently, such as making the most of allowances, is important.

When you’re withdrawing an income from your pension or other sources, you should maximise your Personal Allowance, which is £12,570 for the 2022/23 tax year, and be mindful of the higher-rate threshold.

Withdrawing savings or investments from an ISA can also be a tax-efficient way to boost your income.

Depending on your circumstances, you may also want to take advantage of the Dividend Allowance, Capital Gains Tax allowance, and more. We’re here to help you understand which ones could be right for you.

Careful planning could help reduce your tax burden in retirement and help your money go further.

  1. Growing income inequality

The research identified a growing wealth gap among retirees in the UK.

Understanding your retirement income and how long it needs to last can give you confidence about your future.

While the State Pension often isn’t enough to cover all your expenses, it’s an important building block. How much you receive from the State Pension will depend on your National Insurance record. If you have gaps in your record, you may be able to make voluntary contributions that could boost your income throughout your retirement.

It’s also important to understand how your pension will create a sustainable income, whether you have a defined benefit (DB) or a defined contribution (DC) pension. You may need to consider areas like life expectancy to ensure you have a reliable source of income for the rest of your life.

You may also have other assets that you could use to support your security in retirement, such as savings and investments.

It’s never too soon to review how your decisions will affect your retirement. A long-term plan can help you achieve financial peace of mind.

  1. Low returns on savings

In the last decade, retirees have faced significant challenges when it comes to getting the most out of their money.

As you may not be receiving any income in retirement, your savings growth is important. This can help provide long-term financial security and mean that the value of your assets keeps pace with inflation.

Interest rates have been at historical lows since the 2008 financial crisis. Over the last year, interest rates have gradually started to rise as a way to combat increasing inflation. In September 2022, the Bank of England increased its base interest rate to 2.25%.

Despite the recent rises, it’s unlikely that your savings are delivering returns that match inflation. So, in real terms, the value of your savings is falling. This can present problems, especially as your income needs may increase because the cost of living is rising.

For some retirees, investing a portion of their wealth can make sense. If your savings are held in a pension, they will usually be invested.

Keep in mind that investing comes with some risk and you should assess your risk profile to choose appropriate investments.

Contact us to talk about your retirement

Having a plan could help you retire in greater security and comfort.

We can help you understand how to get the most out of your assets, assess what’s important to you, and consider what steps are appropriate to minimise risks. A robust financial plan means you can focus on enjoying this next stage of your life without having to worry about where your finances stand.

If you’re ready to start planning your retirement, please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.