The UK average pension is a lie

本站添加: 2026-05-12

[00:00:00]Hi everyone, welcome back. You've probably looked this up at some point, average pension at age 60 or some version of it. Or even if you haven't done an online search, you've probably wondered how you compare with others of your age in terms of pension savings.

[00:00:18]But the problem with looking for this sort of information online is that the numbers are not really telling you what you think they're telling you. So in this video, I want to cover two main things. Firstly is to give you the actual data and explain what it means and second explain why asking how you compare isn't an ideal question and instead give you a better one. What does the official data actually say? So let's start with what the data is actually telling us. The most authoritative source of data on personal and household wealth in the UK is from the Office of National Statistics. They run something called the Wealth and Asset Survey. It's updated regularly and this data tells us that for people aged 55 to 64, the median pension pot is 107,000 and the mean pension pot size for the same age group is higher. It's £140,000.

[00:01:08]So which one is right? Well, the answer is that they're both right. They're just asking different questions. They're doing a different analysis. Once we understand what each piece of data is actually telling us, the picture becomes a lot clearer. Why average can be misleading? Mean versus median. So, as I touched upon in the previous section of the video, when people talk about average or when the word average is referred to in reports that you read online, they're usually talking about the mean. And in order to calculate the mean, you take everyone's pension pots, you add them all up, and you get the total size of everyone's pension pot, and you divide it by the number of pension pots that you have. That's the mean. But the mean has a problem because if a small number of people have very very large pension pots, it drags the mean upwards such that the figure that you get stops representing what most people actually have. Let's take a simple example. Let's imagine a room with 10 people in that room. Nine of these people have £50,000 in this pension and one of them is extremely fortunate to have £1 million in their pension pot. The mean pension in that room is 145,000. But the median for this group, the pension figure that's in the middle is £50,000. And that's much more representative of that sample group. So if I told you that the average pension pot size for that room of 10 people is £145K.

[00:02:37]That would technically be true, but it would give you a completely false picture of what a typical person in that room actually has. Which leads me to the next problem with the data, the per pot versus per person problem. The ONS data is per person. It's adding up all the different pension pots that each individual has and it's presenting the total pension wealth per person. But many of the surveys that you'll see quoted in the newspapers, particularly those that come from pension platform providers, will be a report of pension pot size based on the pots that that particular provider has, based on their own data. and it's not representative of the total that that particular person might have. Each pension platform provider only sees what you have with them. They are completely unaware of what other pensions you might have with other providers from previous jobs or any SIPs that you might have for that matter. As an aside, we have been promised a pensions dashboard for years now. This is a single place where you'll be able to see all your pensions in one view. It will be your personal pensions dashboard. So when a pension platform provider publishes their data on average P size, they're just looking at one slice instead of the whole pie. So for somebody with multiple pensions, their total pension wealth could in many cases be two, three, or even more times bigger than what that pension platform provider thinks that they have. Even your total pension isn't the full picture. Most people in their 60s are already drawing upon or are expecting to draw upon the state pension. So at the very least, the other source of income that you will have is the state pension. Most people around the age of 60 will have started their career on a defined benefit pension. So you'll likely have at least one, if not two of these, even if they're relatively small, is still making a contribution to your total pension wealth. And you might also have ISIS, whether they are cash, stocks and shares ISIS, and you possibly also have rental income from investment properties. So when you see a headline that says something like the average person at age 60 has £107,000 in their pension, that tells you very little, in fact, absolutely nothing about whether or not they have enough. Someone with 107K in a defined contribution pension might have a particularly generous defined benefit pension might have a spouse who's still working, might have a spouse with a larger defined contribution pension pot. They might have paid off their mortgage and as a result feel relatively comfortable.

[00:05:11]Compare this with a single person who is age 60, so 7 years away from the state pension, has say £400,000 in a defined contribution pension, but nothing else in terms of other savings, no ISIS, no cash savings, and still has a mortgage, no other sources of income. By comparison, they will be a lot less comfortable and are more likely to be running out of money too soon during retirement if they want to retire at age 60 on a comfortable income. Those two examples I've gone through, they are highlevel examples. There's not precise calculations to illustrate the point between what might appear to be comfortable on paper being a relatively large pension pot. It's all about the total sources of income that you have.

[00:06:02]The key point to take away from this video that I hope I've illustrated is that no single headline number can really tell you anything about whether or not you are on track when you compare yourself to that number. Which is why the only number that really matters for you is your total wealth. And when you are pre-retirement, and particularly if you are some years of retirement, 10 years or more away, your number will continue to be a moving goalpost. Inflation moves it. Lifestyle creep can move it. People are living longer than ever. We're hoping to have a long, healthy retirement. Personal circumstances change, and of course, tax rules keep changing. My experience is that people are only really starting to think about their retirement number, how much they have when they are starting to think about retirement. And that's typically a few years away from when they actually retire for real rather than 10 or 15 years away. We're thinking about much more other important things when we are in our 40s as compared to when we get to our 50s. Then retirement becomes a bigger question and takes up more of our thinking time. Only when we get to our 50s do we start thinking about uh life after work. 40s and absolutely younger than that. Most people aren't thinking about their retirement number. So, I want to come back to something that I said at the start. In my work, when clients ask me what people like them have, how do they compare? Are they on track or falling behind? The honest answer is that usually the published figures, the published averages don't reflect reality of what people really have at all. So, the more useful question isn't to ask yourself whether or not your pension is above or below average. It's instead to ask yourself whether everything you have that will be a source of money for you for your retirement is enough. Until next time with Vatrol.