How much do you need to save for your retirement?

Tracy Dove, Thomas Oliver’s Central London Financial Adviser and Financial Planner, recommends you take pension advice to ensure you are saving enough for your retirement.

Royal London recently issued their Policy Paper 21 – Will we ever summit the pension mountain? The paper tries to answer one of the most common questions in financial planning, how much do I need to save for my retirement? 

Royal London conclude that the pension pot needed to avoid an uncomfortable retirement that Royal London call ‘the pension mountain’ has increased in real terms from £150,000 in 2002 to around £260,000 today. Royal London suggested that in most cases people whose combined pension income was about two thirds of their gross income before retirement were unlikely to see a major change in their living standards when they retired.

However, the Royal London paper also believes that with home ownership falling younger people who can’t afford to buy a property and end up having to pay rent in their retirement will need an even larger pension pot to avoid a reduction in their living standards when they eventually stop work. Royal London estimate that the total pension pot that they will require could be as high as £445,000. Royal London suggested that in most cases people whose combined pension income was about two thirds of their gross income before retirement were unlikely to see a major change in their living standards when they retired.

The Royal London paper considers an average earner with income of just under £27,000 p.a. The paper assumes they receive a full state pension worth £8,500 p.a. It also assumes that there will be cost savings in retirement so someone can live on two thirds of their pre-retirement gross salary.

Tracy Dove, Financial Adviser and Retirement Planner in North London said: ‘The conclusions from the Royal London paper are evidence that it is really important for everyone especially the younger generation to do retirement planning as soon as they start work, and pay into a pension for your retirement to maintain your standard of living and achieve your financial priorities. It is important that people always remember that there is a cumulative impact of not saving enough into a pension early on when you work which could affect your lifestyle in retirement. The financial advisers at Thomas Oliver recommend anyone undertaking pension planning review their company’s work place pension scheme option. As joining a company auto enrolment pension scheme allows you to save into your pension and you benefit as your company contributes to the pension too. Having your employer match your pension contribution doesn’t cost you anything and is a financial benefit. You also get tax relief from the government if you save into your pension.’ 

Tracy Dove, Financial Adviser and Retirement Planner in North London continued: ‘The Royal London figures are worrying as they show that anyone who has to pay rent when they retire will need a much higher pension pot than they may have expected. We know that there are a growing number of middle aged private renters who will be in this situation.  We recommend that they seek pension advice so they save enough to fund their lifestyle in retirement.’

We recommend you read, Tracy Dove, Financial Adviser and Financial Planner in Central London - Are you saving enough for your retirement?, and The benefits of using a financial adviser.