New study reveals “comfort” pension threshold
20/05/2014
An industry report has revealed that those planning their finances for retirement should be aiming to receive an income of at least £15,000 a year.
The figures show that 43% of retirees who earn between £15,000 and £20,000 felt financially secure. However, just 24% of those earning less than £15,000 after retirement felt financially secure, with many of this group struggling to pay for basic expenditures such as groceries and household energy bills.
Additionally, the figures show that earning over £40,000 after retirement will not make you feel much more secure than someone earning less than this.
Save more from an earlier age
The report also echoed some basic, but important financial advice, which is to save more into a pension fund from an early an age as possible.
For example, in order to earn close to the suggested £15,000 upon retirement, a 22 year old would have to save much less on a monthly basis than someone who starts saving from an older age.
The report claimed that a 22 year old who earns £20,600 a year would only have to make the minimum pension contribution of 4% in order to achieve a post-retirement annual income of £14,260. However, a 30 year old earning the same salary, who makes the minimum pension contribution would only achieve a post-retirement annual income of £10,210.
This trend continues, for example a 40 year old under the same conditions would achieve an even smaller post-retirement income of around £10,210.
In order for those who have left later to start saving towards their retirement might want to consider increasing the amount of money they save into a pension fund so it is above the minimum contribution.
How to save more
The creator of the report ‘Nest’ who are a non-profit organisation responsible for supplying pensions under auto-enrolment released some tips to help people save more towards their pension.
Some money savings tips included:
1. Replacing a takeaway with a home cooked meal just once a week could save £12 a week. If all of this was saved into a pension fund, a 30 year old could save a pot of around £50,000.
2. Bringing a packed lunch into work and putting the savings into a pension fund could save a pot of over £63,000.
However, other people such as Tom McPhail, a Pension Expert at Hargreaves Lansdown have argued that a better way to save would be to aim towards earning a fixed percentage of what you already earn. Those earning less would need to earn a higher percentage of their current income than someone on a higher wage.
For example, it has been suggested that someone on a salary of £15,000 would want to earn around 80% of their income in retirement (£10,000), whilst someone on a salary of £30,000 might only want to earn two-thirds of their current income in retirement (£20,000).
Need financial advice?
If you need to ask a financial question then please contact our financial advisers online or over the phone to get help with your query.
Share this..
Related stories
BT looks to clarify crown guarantee
This week will see a very important case come to court in a move instigated by the trustees of the BT pension scheme who are looking to clarify the extent to which the UK government would underwrite the pension scheme via its "crown guarantee". Both BT and the trustees of the BT pension scheme have been in talks for some time about reducing the £9 billion deficit which has built up over the last...
Read MoreGovernment pledges to help those who lost pensions
The minister for pensions reform, Mike O'Brien, has announced a government pledge to match any additional funds located by the Assets Review for people who lost their pensions. The Assets Review has reported that there are £1.7 billion in assets in occupational pension schemes that qualify for help from the Financial Assistance Scheme (FAS).Current practice is for each scheme to purchase annuitie...
Read MoreMassive growth in public sector pension millionaires
A Freedom of Information Act request has revealed a phenomenal rise in the number of "public sector pension millionaires" over the last few years. Based upon the fact that a £33,000 a year pension would require a pension fund of over £1 million on the open market, a staggering 34,000 public sector workers are alleged to be effective "public sector pension millionaires". This is a damning indictm...
Read MoreTwo thirds of people don’t pay attention to pension pots
29/07/2015 Two thirds of people over the age of 45 have admitted to not paying any attention to their pension pot, according to research from Aviva. The research found that 41% of people aged over 45 never take the time out to review or plan their pensions, and 29% only spend one day a year doing this. A quarter of those that are retiring as soon as 2017 have still failed to spend any time...
Read MoreOne in seven to retire without a pension
09/04/2014 One in seven people in the UK who are planning to retire this year do not have any kind of personal pension, meaning they will be heavily dependant on the State Pension. The figures were uncovered by the Prudential in their annual ‘Class of’ study, which examines the future plans of people who are planning to retire this year. Vince Smith-Hughes, a retirement expert from th...
Read More