How much do you need for a comfortable retirement?

clock
How much do you need for a comfortable retirement?

PARTNER INSIGHT: We are all living longer according to the Office for National Statistics - how can we effectively plan for our financial futures

Research by Royal London finds that the average UK earner will need a pension pot of £260,000 to maintain their living standards. It's called ‘the pension mountain' - the size of funds required by savers to afford a pension that keeps them in similar financial circumstances to their working life.

The figure has leaped from £150,000 to £260,000 since 2002. This figure could actually end up much higher, as younger generations face up to failing to afford to buy a house and then be hit with rental costs into retirement. The £260,000 figure assumes that a worker on an average wage of £27,000 will draw a state pension of £8,500 a year on retirement and have generally lower travel and mortgage costs in older age. This will mean they require more than £9,000 private pension income to help them match their previous living standards.

Life expectancy

Fifteen years ago, a lower life expectancy and higher interest rates impacted on the pension pot figure. "If our retirement pot is going to support us through a longer retirement and in an era of lower interest rates, we are going to need to build a much bigger pot than in the past," said Royal London personal finance specialist Helen Morrissey. "More worrying still, we can no longer assume that we will be mortgage-free homeowners in retirement."

The potential for rent costs to impact on living standards must be factored into people's funding strategy, she added. "For all of these reasons, we cannot afford to be complacent about current levels of retirement saving."

Government move

While the government's move to create an 8% mandatory pension contribution from a combination of the employer and employee from April 2019 is a "great start", it needs to work more quickly to "nudge people up" to more realistic savings levels. "Without this, many millions of people will face a sharp drop in living standards," Morrissey concludes

To help your clients meet their retirement objectives click here to read our investors guide.

More on Partner Insight

7IM partners with Just to expand advised retirement proposition

7IM partners with Just to expand advised retirement proposition

Increased flexibility

clock 10 May 2022 • 2 min read
Partner insight: Adapting to a changing interest rate environment

Partner insight: Adapting to a changing interest rate environment

2022 has been a turbulent year but in terms of monetary policy, it has also been a fascinating one

Invesco
clock 06 May 2022 • 1 min read
Partner insight: Tackling inflation - the fixed income view

Partner insight: Tackling inflation - the fixed income view

With real yields negative in many markets, where might you find the returns you need?

Invesco
clock 03 May 2022 • 1 min read

In-depth

The pursuit of (post-acquisition) independence

The pursuit of (post-acquisition) independence

Acquirers 'want investment revenue'

Jon Yarker
clock 07 April 2022 • 8 min read
What should adviser firms do when a SIPP provider goes bust?

What should adviser firms do when a SIPP provider goes bust?

A port in a storm

Hannah Godfrey
clock 09 March 2022 • 7 min read
Return of the Provider: A vertical integration story

Return of the Provider: A vertical integration story

Eight providers and their advice arms

Tom Ellis
clock 02 March 2022 • 7 min read