You want us to be rich in retirement? We need to talk

Many couples in Scotland are in danger of putting their financial futures at risk by not talking to each other about planning for their retirement.

Research released this week by Prudential shows that more than one in four couples in Scotland over the age of 40 have never discussed retirement planning and nearly two thirds have not done so in the past five years.

These figures suggest that not enough people understand the importance of saving for their future. Many people still believe that either the state or their employer's pension will look after them in retirement and so there is little need to discuss this with their partner.

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However, despite pledges from politicians of increases to the basic state pension, the reality is that people can no longer rely on the state to give them a comfortable standard of living in retirement. This will only get worse as the population continues to age.

Most people will also not be able to rely on their employer. Few people now spend all their career with one employer and more employers are closing down final salary pension schemes; pensions that provide the best benefits to employees. It is therefore important that people realise they need to provide for themselves.

However, many people have a negative perception of pensions and the rules relating to them can be confusing. The Prudential research found that more than one in three couples in Scotland don't have detailed knowledge of their partner's pensions and investments, while more than one in ten said they were not really interested.

This is not just the result of poor communication among couples but also because the financial services industry has not effectively engaged with people; because bad news stories are the ones more often in the press headlines; and because successive governments have continually tinkered with pension and tax rules.

It is estimated that to get a decent standard of living in retirement the average worker should be saving about 10 per cent of their pre-tax salary if they start saving in their twenties or early thirties. However, those who delay starting their pension savings until they are in their forties need to put aside more than one-third of their salary to be sure of a comfortable retirement, a figure that will be beyond the scope of the vast majority of people.

One way of looking at retirement planning is to view it as a journey. The first question you need to ask is: where are you now? This will involve understanding any existing pensions, investments or savings you have and considering what disposable income is available to make further savings.

The second question is: where do you want to go? Couples may have different views over when they want to retire and how much income they will need.

The final question is: how do you get from where you are to where you want to go? Answering this question may reveal that retirement plans are not on track. If that is the case then you may need to retire later than you had hoped or prepare to live on less in retirement than you were expecting.

The Prudential research is another pensions wake-up call.

l Patrick Connolly is head of communications at AWD Chase de Vere.

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