Retirement care costs need to be factored into pension pots or people will be left struggling to survive.
Long-term retirement planning is vital to ensure that pensioners have access to sufficient funds when they leave work.
Millions of future pensioners may have to spend their retirement in poverty if the current system is not redesigned, according to a new study.
The CII Retirement Savings Report, revealed by over-50s service provider Saga, highlights that at least a quarter of 65-year-olds require over £50,000 each to spend on care. However, many have failed to set aside this separate sum – the average pension fund is just £30,000 but this does not cover care costs. The findings highlight that care funding needs to be incorporated into pensions savings in order to prevent the creation of an aged demographic that cannot afford their living expenses.
Dr Ros Altmann, director-general of Saga, said: “It is absolutely vital we reinvigorate long-term savings. People have lost faith in pensions and many have put no money aside for retirement, never mind for long-term care”.
She also suggested that more people could be encouraged to save for a pension if new incentives are introduced, such as a lottery where savers could win £1 million for contributing each month.
Dr Altmann said: “We cannot go on like this. Saving more is important – perhaps we can rename private pensions and have lottery prizes to help increase the attractiveness of retirement saving. But people will have to work longer as well”.