Reckon you’ll still get an annual holiday when you retire? You’ll need a £587k pension pot to do it
IF you want a comfortable retirement you'll need to build up a pension pot of £587,116 per person - or £355,856 if you're in a couple - according to new research.
This is if you want to turn your pension into an annuity, which pays you a guaranteed annual income for life in retirement.
An annuity isn't always the right option for every in retirement - you could leave the cash invested or take out lump sums as and when you need to.
But if an annuity is right for you, trade body the Pensions and Lifetime Savings Association (PLSA) has worked out how much you'd need to save to have the lifestyle you want in retirement.
For a comfortable retirement, the PLSA says you'd need to spend around £33,000 a year as a singleton or £47,500 as a couple.
This would mean you can enjoy some luxuries, such as regular beauty treatments, theatre trips and three weeks in Europe a year.
Moderate retirement lifestyle
How much do I need to spend?
- For a single person outside of London - £20,200
- For a single person in London - £24,400
- For a cohabiting couple outside of London - £29,100
- For a cohabiting couple in London - £33,100
What do I get?
The moderate lifestyle gives you more financial security and more flexibility.
For example, you could have a two-week holiday in Europe and eat out a few times a month.
Savers would have the opportunity to do more of the things they want to do.
How much do I need to save in my pension?
A single person who qualifies for the full state pension would need to have a pension pot of £267,116 to turn into an annuity.
For couples you'd need a joint pot of £125,856 to turn into an annuity.
Am I on track for a comfortable pension?
IF you are only putting in the minimum amount for your workplace pension then you are not saving enough for a comfortable pension..
The earlier you start saving, the less you'll need to put away each month. Here's how much you'll need according to consumer group Which?
- Which? reckons that you need to be saving £131 into your pension a month from age 20 to be able to have a comfortable pension.
- Anyone over 30 would have to save up to £198 a month.
- If you start savings at age 50 you need to be saving a staggering £633 a month to be able to have a £26,000 a year income when you retire.
- These figures assume that your employer pays his or her part of your pension contributions.
- You will also receive a state pension depending on how much national insurance you have paid over your working life; the maximum amount you can receive is £164.35 a week.
Comfortable retirement lifestyle
How much do I need to spend?
- For a single person outside of London - £33,000
- For a single person in London - £36,000
- For a cohabiting couple outside of London - £47,500
- For a cohabiting couple in London - £49,500
What do I get?
Pensioners who have saved enough for a comfortable retirement could enjoy some luxuries like regular beauty treatments, theatre trips and three weeks in Europe a year.
They could also afford a weekly food shop of £65 and could spend up to £150 a month on clothes and shoes.
They're also the only group that can afford proper home improvements with a kitchen or bathroom replacement every 10 or 15 years.
How much do I need to save in my pension?
Even if you qualify for the full state pension, you'll still need to build up a £587,116 pension pot if you're single. Meanwhile couples will need a pot of £355,856.
If you choose to keep your money invested once you retire, drawing some each year - you'll need a bit less.
Guy Opperman, minister for pensions and financial Inclusion, said: “It’s great to see what the PLSA has developed which has the potential to help savers think about the future and plan for the retirement they want.”
If you're thinking of starting a pension, Which? found that a 20-year-old needs to put away £131 a week to get a £26,000 a year pension.
While here's how builders and electricians starting on £18,000 a year could get a £100,000 retirement pot.
How pension fees could reduce your savings pot by hundreds of thousands of pounds – and how to avoid them.
Women £106k worse off than men at retirement due to lower paid jobs and part-time work.
And finally, here's how to boost your state pension by up to £250 a year.