Pension warning: Britons need £22,500 yearly for ‘ideal’ retirement – do you have enough?

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Pensions and savings: Interactive Investor expert gives her advice

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Pension saving can be difficult, as Britons juggle costs in the present, rather than necessarily planning for the future. However, a failure to do so could leave individuals woefully unprepared for retirement.

This has been emphasised by the fact individuals will need thousands of pounds each year in retirement, according to Canada Life.

The organisation’s insight showed people approaching their retirements would ideally like an income of £22,500 on average.

This ideal figure equates to a “moderate” living standard according to figures from the Pensions and Lifetime Savings Association (PLSA).

The sizes of pension pots appear to have a distinct impact on retirement expectations. 

Those who have a pension pot under £200,000 have an “ideal” retirement income of £20,000 a year, on average. 

However, those who saved over £200,000, the figure was recorded at £28,300.

The latter is closer to the idea of a “comfortable” retirement as calculated by the PLSA.

A “moderate” retirement provides financial security and flexibility according to the organisation.

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This includes a £47 weekly shop, a two week holiday in Europe, and £30 allocated for each birthday present. 

Whereas a “comfortable” retirement goes the extra mile, with a £59 weekly shop, three weeks in Europe, and £50 for each birthday present. 

Nick Flynn, retirement income director at Canada Life, offered further insight into the matter.

He said: “A generation of savers planning their retirements have relatively moderate ambitions for their ideal incomes. 

“Far from splashing the cash, the over 55s are seeking an income of around £22,500, which combines both private savings and the state pension of around £9,339 currently. 

“This requires the pension and any other savings to generate an income of around £13,161 a year.”

If a person is looking at current standard annuity rates, they should be aware of what they purchase and how much it will be worth.

Mr Flynn said a pension of £200,000 could deliver around £10,000 a year guaranteed for life.

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This is likely to be more for individuals who qualify for enhanced rates and better income.

The matter usually hinges on a person’s health or their lifestyle choices. 

Regardless, if a person decides an annuity is the right step for them, they need to consider this carefully.

Mr Flynn pointed Britons towards an adviser or annuity broker to help individuals find out more. 

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