My other assets will be enough

Unless you are in the top 5% of the population in terms of wealth, this is extremely unlikely to be the case.  The reality is that we are all living longer and a retirement at age 65 may well mean you need to provide for yourself and spouse for another 20 years.

Many people underestimate the costs of retirement – especially when expectations about life style in retirement have changed considerably from the “pipe and slippers” image, towards thoughts of seeing the world and visiting distant relatives.

Changing demographics also mean you could well become part of the “sandwich generation” with family responsibilities well into traditional retirement years – either for your children or your parents.

People also underestimate the cost of buying a pensions income – every £1,000pa of income is likely to cost you in the region of £25,000*. Using this approximate number, even a £1million pension pot would only provide £50,000 a year income.

There is also the cost of long-term health care which is extremely expensive – there is a good chance you are likely to need it at some stage in your life.

Spreading your risk among different types of asset is always sensible, so if you do have additional assets that will give you greater freedom and flexibility in your retirement choices. However, the chances are very high that you will also require income from a pension and as things stand, a pension is still the most tax efficient way of saving for retirement in the UK.

*£25,000 is not intended to be an accurate figure, the real figure will depend on your circumstances and the price of pensions when you decide to buy one.  It’s just a useful number to help you to realise how little income you might possibly get from what looks like a large sum of money.

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