Millennial investors face a £28,000 annual disappointment in retirement

According to the latest BlackRock Investor Pulse survey, the mass affluent millennial population faces an average annual shortfall of £28,000 in retirement – almost double the shortfall of the current mass affluent generation.

BlackRock defines the ‘mass affluent’ as investors that have either £100,000 in annual personal income, £150,000 household income or £100,000 investable assets.

Nearly three quarters of mass affluent Brits said it’s important for them to earn an income on their investments, yet they still allocate more than 40% of their assets to cash.

Mind the income gap

Mass affluent investors say they will need an annual income of £32,456 in retirement and expect a pot of £396,910 will achieve this. In reality, they face an annual income shortfall of £12,610.

This gap widens further among the millennial age group, who face the biggest disappointment. They want an income of £43,103 a year and think £300,934 will be sufficient. This will in fact leave them with a shortfall of £28,057 annually. Even factoring in the state pension, millennials are still going to be short by more than £20,000 per year.

It’s not just the retirement pot people underestimate, but also how long they are going to live. The average mass affluent millennial expects to live to 80, but one in five of them will live to 100*, making them twice as likely to reach this age as their grandparents. Furthermore, they believe they’ll be able to retire at 61, an unlikely ambition given the annual income shortage they are already facing.

While those aged 35 to 44 have a more realistic expectation, believing they’ll live to 84, there is still an 18% chance that they’ll reach 100. This indicates that many are not factoring in how far their savings will need to stretch.

Jeremy Roberts, Head of UK Retail Sales at BlackRock said:

“Long-term low interest rates and the recent focus on pensions has pushed the need for income into the spotlight. However, instead of looking for ways in which to generate additional income, many still stick to the safety of cash. Cash is not going to keep us warm at night, especially in those extra five or 10 years that we haven’t even planned for.”

BlackRock Investor Pulse survey

BlackRock’s survey was conducted from July to September 2015 amongst a nationally representative sample of 30,500 financial decision-makers, in 20 countries, aged 25 to 74 years old. The sample for the UK was 4,000 people. The results of the survey are provided for information purposes only. The conclusions are intended to provide an indication of the current attitude of a sample of UK citizens to saving and investing and should not be relied upon for any other purpose.

*Source: ONS – How long will my pension need to last?

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