You are here: Home - Retirement - Retirement planning - News -

Workers need to save £800 a month to afford ‘moderate’ retirement

Written by:
The average worker on a full-time salary needs to save around £800 a month, or a quarter of their earnings, to afford a ‘moderate’ lifestyle in retirement, new analysis reveals.

Research from the Institute and Faculty of Actuaries (IFoA) shows a monthly saving of £799 over an entire working life would provide an income in retirement to allow for a two-week holiday in Europe plus a long weekend in the UK every year, a £46 weekly food shop and an annual clothing allowance of £750.

Workers who want a ‘comfortable’ lifestyle in retirement would need to save £1,755 a month, the calculations show. This would be enough for three weeks in Europe every year, a £56 weekly food shop and £1,000-£1,500 for clothing and footwear each year.

However, the IFoA warned that “a large proportion of the population” will not be on course to achieve an adequate lifestyle in retirement because they only contribute the bare minimum to their workplace pension as part of automatic enrolment (AE).

Under AE current rules, the minimum contribution is 8 per cent, which includes 4 per cent from employees.

Mark Williams, chair of the IFoA’s pensions board, said: “We appreciate that these savings goals are high, and to many, they will appear daunting. But as actuaries, it is our role to ‘do the maths’ and we believe that it is in the public interest to demonstrate the potential scale of under-saving, and the impact it could have on people’s retirement prospects.”

Worryingly, a poll by the IFoA found almost a third of UK workers do not know what constitutes a ‘good pension pot’ with a fifth considering a less than £100,000 pot to be sufficient. This would buy an annual pension of £2,825 at age 68 for a current 22 year old, according to the IFoA.

Steven Cameron, pensions director at Aegon, said: “This is a stark warning for workers that saving even for a ‘moderate’ retirement takes careful planning, starting as early as possible, and being realistic about the amount that they need to save every month.

“While auto enrolment has had a positive effect by raising the profile of retirement planning and encouraging millions of people to get into the savings habit, the current minimum contribution rates means many may be under-saving.”

What you can do now to boost your pension pot

“The first step is working how much you have to save to maintain your desired standard of living in retirement. For many, this will reflect their pre-retirement standard of living,” said Cameron.

He then suggests increasing the monthly contributions into your workplace pension.

“It’s also worthwhile looking at the employer contributions and make the most of what they offer. Some will match any additional contributions you pay pound for pound.

“It may also be worthwhile seeing a financial adviser so that you can benefit from advice that meets your personal needs and circumstances.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Thomas Cook’s airport slots sold to easyJet and Jet2

The failed holiday company’s slots at Gatwick and Bristol have been sold to easyJet, and slots at Birmingham...
Thomas Cook’s airport slots sold to easyJet and Jet2

Royal Mint launches The Snowman 50p coin

In the run up to the festive season, The Royal Mint has issued a new commemorative 50p coin featuring The Snow...
Royal Mint launches The Snowman 50p coin

Mamas & Papas falls into administration

The parenting store has closed stores just days after rival Mothercare went bust.
Mamas & Papas falls into administration

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week

  • RT @DomWrong: UK avoiding a recession but it will be harder to grow if the rest of the global economy slows according to @ArtBLondon on @Yo
  • RT @HendersonRowe: “Brexit aside, the UK will struggle to expand if the rest of the global economy is slowing down. After a strong July and…
  • RT @HendersonRowe: “Brexit aside, the UK will struggle to expand if the rest of the global economy is slowing down. After a strong July and…

Read previous post:
Brits withdraw more than £30bn from pensions in four years

More than £30bn has been taken out of pension pots since pension freedom rules were introduced but the average withdrawal...