How much should you be saving into your pension?

According to Which?, a yearly income of approximately £25,000 for couples or £19,000 for individuals can provide a ‘comfortable’ lifestyle in retirement. For couples, this translates to saving £276 per month if you’re 30 and haven’t started pension savings yet. This amount increases to £384 monthly for couples if you’re 40 and have no pension savings, and £647 per month if you’re 50.

If you’re unsure about how much you need to save for your retirement, you’re not alone. The PLSA/Loughborough University Retirement Living Standards suggest that as many as 77% of people in the UK don’t know either1. However, it’s almost certain that the state pension you receive from the government will not be enough to live on by itself, meaning you need to take responsibility for supplementing that income with your own savings.

When planning for retirement, considering when to begin saving and determining how much to save, here are the most crucial factors to consider:

How long will you require your pension income for? The first thing to contemplate is when you’re likely to retire and how long you’re expected to live, so you can estimate how many years your pension savings will need to last. While this is impossible to predict accurately, some facts can give you a reasonable indication:

  • The average life expectancy at birth in the UK is just over 79 years for males and just over 83 for females, while one in five boys and one in three girls can expect to live to at least 90, according to an ONS statistical bulletin.2
  • The same ONS bulletin also stated that people who have already reached 65 can anticipate, on average, nearly another 19 years if they’re male and just over another 21 years if they’re female, taking them well into their 80s.

So if you plan on retiring in your mid to late 60s, it’s reasonable to expect that you’ll need your pension income to last for at least 20 years – and of course, if you want to retire early, you’ll need more, especially since you won’t be eligible for the state pension until you’re at least 67 (from 2028 onwards).

How much will you need on top of the state pension? The best starting point is to figure out what kind of lifestyle you’ll be hoping to lead, assuming you stay well, and how much money you’ll need to afford that. Obviously, for a precise amount, you’ll need to do your own calculations, but there is research available that will give you a ballpark figure to work from.

According to the consumers’ association Which?, which recently surveyed 6,300 retired and semi-retired members3, the numbers are as follows:

  • A retired couple living a ‘comfortable’ lifestyle will spend about £25,000 (£19,000 for individuals) a year for basics and for luxuries such as eating out, European holidays and hobbies
  • A more ‘luxurious’ lifestyle, that might include long-haul holidays and a new car every five years, would cost £40,000 a year for couples (£30,000 for individuals)

This research is supported by the PLSA1, which calculated:

  • A retired couple with an annual income of £29,100 would be able to afford all the basics, have one foreign holiday per year and eat out a few times a month

How much will you need in your pension pot? Before you start working it out, don’t forget that you can factor in the state pension you’ll receive, which will make a substantial contribution towards your income needs. Here are the calculations that Which? has done3, based on a couple living together and having a defined contribution pension:

  • A couple can expect their state pension to be around £14,000 a year (and this is likely to increase increase by at least the rate of inflation)
  • So for that ‘comfortable’ post-tax income of £25,000 a year, you’ll need to generate your own income of £11,000 a year
  • That means having a pension pot of £262,500 if you opt to have the income paid via an annuity (that is, where you use your pension pot to buy a guaranteed income). Or it would drop to £169,175 to get the same amount from income drawdown, which is when you keep your money invested and you withdraw a regular income from it (and this is assuming your savings grow by 3% annually)
  • For the more ‘luxurious’ lifestyle, you’ll need an income of £26,000 on top of your state pension
  • That will require a pension pot of £718,300 if you go for an annuity or £456,500 if you go for income drawdown

So how much do you need to save every month? This will depend on how old you are now and how much you’ve paid into a pension scheme already (if anything). But, again, Which? has worked out some ballpark figures3 for couples to help give you an idea (based on you choosing the income drawdown option):

  • 30-year-olds with no pension savings so far: £276 a month for the ‘comfortable’ lifestyle and £741 for ‘luxurious’ (or if you already have £100,000 in your pot, it’s £73 and £507 respectively)
  • 40-year-olds with no pension savings so far: £384 a month for the ‘comfortable’ lifestyle and £1,030 for ‘luxurious’ (or if you already have £100,000 in your pot, it’s £133 and £742 respectively)
  • 50-year-olds with no pension savings so far: £647 a month for the ‘comfortable’ lifestyle and £1,735 for ‘luxurious’ (or if you already have £100,000 in your pot, it’s £278 and £1,311 respectively)

(These figures are based on receiving 20% tax relief on your pension contributions and an assumption that your pension pot will grow by 3% per year after charges.)

What should you do now? Whether these figures scare you, or make you feel comfortable that you’re on track for the retirement you want, it’s important to remember that everyone’s circumstances are different and therefore it’s always helpful to seek advice from an expert.

A good financial adviser will take the time to assess your retirement goals – such as what age you’d like to retire and what kind of lifestyle you’d like to lead – then examine your current finances and work out a realistic plan that will help to get you there.

These figures are for illustrative purposes only and based on Which? calculations.

The value of an investment with St. James’s Place may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.


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