empty handsFrank May/DPA/Press Association Images

It's official: this is a full scale pensions crisis. Some 44% of people don't think a pension is going to make up any part of their income in retirement. This means 15.7 million of the working population heading for retirement with no pension in place - and no plans to do anything about that before they hang up their boots.

So what exactly are they planning to live on, and is this such a bad idea?


Penions Tools & Tips

Retirement Tips & Tools


Alternatives

Baring Asset Management, the international investment management firm, asked people to name their sources of income in retirement, and only 56% said a pension was going to play a part.

Instead they plumped for other popular favourites. Some 29% said that cash was going to form part of their retirement planning (up from 26% last year). But while savings are clearly an essential part of planning - and vital for short-term lump sum spending - it won't be any use at all in providing an income.

Penions Tools & Tips

Retirement Tips & Tools



Property

The number that selected property as forming part of their retirement fund also increased to 29%. There are those who will end up using equity release, and those who choose to downsize. However, they need to be aware that both approaches have downsides. There will be those for whom equity release eats up any inheritance, while others will try to downsize and discover their property is not worth what they thought.

Marino Valensise, Chief Investment Officer at Barings, comments: "It is astounding that over one in ten people have focused all of their retirement planning on property. This suggests poor planning in terms of asset allocation, and a poor understanding of the risks involved, by large numbers of people in the UK."


Parents

Meanwhile, 17% of people, or 6 million in the UK, said they expect inheritance to help fund their retirement. This expectation is more acute for the upper and middle classes: nearly one in four (23%), said that inherited assets form part of their retirement planning. However, with the average UK inheritance estimated at around £45,000 per person, many people may be overestimating the role inherited assets may play in helping fund a retirement.

Even more alarmingly, the study also found that one in four (25%) - 8.8 million people - admit they simply don't know how they will fund their retirement.

Pensions

The loss of faith in pensions is understandable. The scandals have been endless, and criticism over everything from fund management to charges has helped turn people off. Many people don't like the idea of investing in something they cannot access along the way, while others are putt off by having to buy an annuity at some point with their savings.

However, pensions remain a vital part of retirement planning. The tax relief alone means it should not be overlooked - especially where it is offered by an employer who is also willing to contribute.

The experts say that everyone's retirement solution will be different, but that it's vital to think it through very carefully and perhaps talk to an adviser - to make sure your retirement plans don't all fall apart just as you come to rely on them.

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