Legal & General's pension strategy director Adrian Boulding has produced a simple test for those who...
Legal & General's pension strategy director Adrian Boulding has produced a simple test for those who want to work out how much they need to save to retire on two-thirds of their final salary.
Boulding said to achieve this an individual needs to make a pension contribution which, as a percentage of their pay, is at least half the age at which they start saving. For a 20-year-old, this is at least 10% of salary, at age 30 it is 15%, at age 50 at least 25%.
Diane Buckley, director of the corporate business division at L&G, said: 'Individuals also need to increase the amount they save each year so their pension funding keeps pace with increases in inflation or a need for higher income.
'Unlike final salary schemes, they have to spot the warning signs of a possible shortfall.'
L&G's warning comes on the back of research by actuaries Lane Clark & Peacock suggesting that the total money going into final salary schemes is still £600m per year short if the promises made to staff on their pension funding are to be delivered.
Buckley pointed out that in a defined contribution scheme, payment in retirement is linked to investment performance, not to length of service and earnings.
L&G's campaign on pension funding comes at the same time as a survey by Saga found that 40% of those now over the age of 50 plan to delay retirement for financial reasons.
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