Saving to secure the kind of pension you would like to live on

How much money do you need to save to secure the kind of pension you would like to live on when you retire? It’s a question that concerns everyone saving for their retirement.

 

So it’s essential to make sure your numbers add up, especially as older people have seen their cost of living rise by almost a fifth in four years, according to calculations from Saga. Working with the Centre for Economics and Business Research, Saga estimated that the cumulative inflation rate on the RPI gauge has been 13.9 per cent for the general population over the past four years. But people aged between 65 and 74 have suffered a rise of 19.1 per cent.

Daunting prospect
Add to this the daunting prospect that one in three workers in the UK does not currently have a private or company pension, it means that around 15 million people will have to rely on the State pension or personal savings when they retire, according to research of 1,600 adults by Prudential.

This makes the question ‘How much money do I need to save to secure the kind of pension I would like to live on when I retire?’ even more important. Much will depend on when you plan to retire. Some people expect to have to work until they are 65, some with a good pension may aim for 60 and others plan for an early retirement during their 50s.

New-found freedom
Many of us may dream of long, easy days in retirement, enjoying our new-found freedom. But the illusion can too easily be shattered if we do not have enough income to live on. Few of us may realise just how much we could need in retirement to achieve a comfortable standard of living and how long it will have to last.

As more people are living longer today, so our pensions have to last longer during our retirement years. Realistically a pension may have to provide us with an income for over two decades, if not longer, after our salary stops.

Factors to consider
There are several factors to consider, such as your current age, how many years left before your retirement, how you plan on spending your retirement years and how much you can afford to save.

When you retire, the chances are that you may not need as much to live on as you do when you are working. As an estimate, a figure of between two-thirds and a half of your present income may be sufficient to maintain a good standard of living.