WIREDGOV

Almost one third of people may face financial difficulties when they retire, according to new research, and today the Financial Services Authority (FSA) and Association of British Insurers (ABI) are launching a tool to help.

The online pension calculator is designed to help people gauge how much they will have to live on in retirement.   The calculator’s launch comes as new figures published today by the FSA reveal 31% of people may suffer an increase in financial problems when they enter retirement.  

The research examines how life events such as unemployment, bereavement and household status affect levels of financial capability.  Planning for financial security in retirement is especially important in the current economic climate, as more people than ever are facing difficult financial situations and finding their financial capability skills to be insufficient.   

The pension calculator, on the Moneymadeclear website, enables anyone with a pension fund from a previous employer, those paying into a new pension scheme, or people without any existing pension at all, to calculate their potential retirement income based upon regular payments.  Further functionality will be added to the calculator in the future. 

With personal circumstances frequently changing, users are also able to adapt the criteria to suit changing circumstances – for example, to see how their potential future income can be affected by retiring earlier or contributing more.

Chris Pond, FSA director of financial capability, said:

"For many people, pensions are not something they want to think about until retirement is imminent and by then they may find their pension falls far short of the lifestyle they had hoped for.  So it's important to do as much as possible to make the most of your money by considering all the choices available.  The pension calculator can help you identify the implications of your pension choices and impact on later income to determine if you are on the right track."

Maggie Craig, ABI director of life and savings, said:

"The pension calculator is an invaluable tool for anyone who wants to engage with planning for retirement, and you can’t be too young to start that process.  As ‘defined contribution’ pensions, particularly those available through the workplace, become increasingly popular, the pension calculator will help people to plan for how much they need to save in order to be financially comfortable in retirement."

Moneymadeclear is an impartial service from the FSA that can help with everything from mortgages to savings, pensions and budgeting.  When it comes to pensions and managing money in retirement, the website contains a range of impartial information, resources and tools including the pension calculator, comparative tables for pensions and annuities, as well as a checklist to help those thinking of retiring soon.

Notes for editors

1. The Institute of Social and Economic Research was commissioned by the FSA to use the British Household Panel Survey, a longitudinal dataset, to examine how life events such as unemployment, bereavement and household status affect levels of financial capability. 
2. Breakdown of the survey, published September 2009:
   • Retirement increases financial problems by 31%;
   • The research shows that there are life points in which people’s financial capability level changes, indicating that they are particularly in need of preventative intervention at these points to help them adjust to new, perhaps unexpected challenges.
3. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
4. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.