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‘Comfortable’ retirement income is £15k a year, says study

Joanna Faith
Written By:
Joanna Faith
Posted:
Updated:
19/05/2014

Retirees need around £15,000 a year for a comfortable retirement, according to a report by automatic enrolment scheme NEST (National Employment Savings Trust).

It found that pensioners living on a household income of £15,000-£20,000 had a better quality of life compared to those living on less.

The report looked at a number of factors, including pensioners’ ability to afford everyday household bills as well as their sense of satisfaction with life.

NEST calculated that the average worker likely to be automatically enrolled into a workplace pension scheme at the minimum levels should be able to save up enough over their working life to get “most of the way to that threshold”.

A worker who starts saving at 22 should be able to double the amount of income they receive from a flat rate State Pension, by the time they reach retirement age, even if they only put in the minimum level of contributions, the report said.

However, the research found that any additional income above the new State Pension – which will be worth £144-a-week when it comes in in April 2016 – has a positive impact on quality of life, with wellbeing rising significantly at around £15,000-£20,000 a year and levelling off at around £40,000 a year.

Tim Jones CEO of NEST said: “Retirement is now more likely to be a gradual shift than a one-time ‘cliff edge’ event. Many people will have more time to save up and the latest reforms to pensions mean there’s more choice than ever for accessing retirement savings during later life.

“Our findings underline the message that tomorrow’s worth saving for. However people access their retirement savings in future, our research suggests most people will want around £15k a year to live comfortably.”

Want to top up your pot? Here are seven quick ways to save:

If they started now, a 30 year old could build up extra savings with a few small changes to their spending habits. For example:

Weekly, if you: Each week you could save: If you put this towards your pension you could build up:
Cut out one coffee shop coffee £2.80 £11,800
Had one less pint £3.50 £14,800
Switched your mobile phone tariff £3.80 £16,100
Cut out a packet of cigarettes £7.40 £31,400
Worked out at home instead of paying for gym membership[iv] £8.50 £36,100
Cooked at home at least once instead of getting a take-away or eating out £12 £50,900
Brought a packed lunch to work every day £15 £63,700

Source: NEST