Recent Budget changes and Workplace Pensions focus people’s minds on retirement planning – and one of the most common questions asked is “how much pension do I need and how much should I be saving?”
There’s lots of research on this topic and one of the most recent studies is by the National Employment Savings Trust (NEST).
Their report suggested that for most, a comfortable pension income is between £15,000 and £20,000 a year, per person.
Although the upcoming state pension changes will cover some of this income requirement, individuals will need to cover the remaining shortfall and this will require a sizeable pot of savings.
To give you some idea, a person in their mid 60’s who needs a top up income of £10,000 at today’s interest rates would require a pension fund between £200,000 to £300,000, dependent upon how much protection you wanted against the savage effects of inflation.
This then leads to the question of how much to save?
Unfortunately there is no simple answer because it is impossible to predict the future. We cannot say how much a person is likely to earn for the next several years.
Some pundits would say you need to contribute a proportion of your earnings equivalent to half your age at the time you start seriously saving. For example, a 40 year old just starting savings into pensions would need to put aside 20% of their income whereas a 20 year old would probably aim to save 10% of their income.
At Platinum, we take a more calculated approach that takes into account your personal circumstances as this allows us to give an ideal monthly contribution to hit your target.
There are some interesting statistics that have come out of the NEST research as they attempt to encourage greater savings. With figures based upon a 30 year old, working to state retirement age (68);
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Cutting out one takeaway coffee per week could allow you to save a pot of £11,800
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Switching mobile phone tariff can enable savings of £16,100 over the same period
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For smokers, cutting out just one packet of cigarettes per week would enable savings of £31,400
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Cut out a takeaway each week and you could save £50,900
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Taking a packed lunch to work could save you a huge £63,700
One thing is certain – everyone needs to take control of their savings and retirement planning, so contact us if you want to find out more about how you can be on track. Because achieving a comfortable retirement is not a luxury.