According to recent research*, the amount needed to fund a comfortable retirement, when someone opts to stop work at 65 and decides to buy a single-life annuity with inflation protection, has now reached £260,000.
The report points out that for those who don’t make it onto the housing ladder and so will need to pay rent during their retirement years, the figure will be even higher at £445,000.
In arriving at these figures, the research assumed average earnings of £27,000 a year, and a full state pension of just over £8,500.
Saving for a comfortable retirement
The sooner you start your pension plan, the longer your money will have in which to grow. Even in today’s climate of low interest rates, compound interest and reinvested share dividends can play an important part in investment growth.
One of the most attractive features of pension saving is the tax relief. If you make contributions to a pension, or if your employer deducts your payments from your salary, you automatically get 20% tax relief as an additional deposit into your pension pot. If you are a higher-rate taxpayer you can claim an extra 20%, while those paying additional-rate tax can claim back an extra 25%. When you retire, you can usually take 25% of your savings as a tax-free lump sum.
If you save into a workplace pension, your employer should match some or all of your contributions, providing a welcome boost to your pension.
Getting the right advice
So, if you’re self-employed, an employee, work part-time, run your own business or have accumulated pension pots with past employers, we can offer you the advice you need to make sure you have the right pension plan in place. After all, we’d all like our retirement to be an enjoyable and fulfilling stage of life, not a time spent worrying about money.
*Royal London, 2018