How Much is Enough for Retirement?

The retirement savings crisis is more pertinent than ever. The rising cost of living has put a huge financial strain on workers and it means they’re saving less for the future. As they focus on day-to-day costs, saving for retirement (which is so far away for many) has become lower in the list of priorities.

Saving enough for a comfortable life in retirement is crucial, but most of us have no idea how much we’ll need when we get there. Many people assume their state pension will be enough to provide a substantial income for retirement, but that’s rarely the case.

According to research from the Pension Lifetime Savings Association’s (PLSA) UK Retirement Living Standards, there’s a disparity between the amount needed for a minimum living standard in retirement and the amount that the state pension currently stands at – which is ￡10,600 per year.

This research concludes that an individual would need ￡12,800 per year to achieve a basic level of income to sustain retired life. This ‘minimum’ lifestyle offers the essentials; groceries, eating out once a month, possibly a holiday – but no car and minimal luxuries.

This isn’t a problem necessarily, but people need to ask themselves what kind of life they’d like in retirement – would this minimum living standard be sufficient for their ideal lifestyle? Possibly not.

It’s also worth noting that many state income pensioners fall short, especially in today’s financial climate. As inflation climbs, all pensioners face the challenge of managing their remaining savings – but a fixed low income doesn’t make the task any easier.

Getting to retirement after 60+ years in the workforce should be a reward, a relief and something to enjoy – not a struggle. As costs may continue to rise, it’s worth considering where your money is kept on the lead up to retirement.

Is your savings method providing you with the most value? Is there a way you could grow your pot without having to contribute more?

These are questions that many don’t have the answer to, simply because they don’t know enough about their pension scheme or their savings options. That’s why learning about your pension is so important, it gives you the power to make the best decisions for your future financial wellbeing.

What are some immediate actions you can take to learn about your pension?

1.????? If you don’t already, get to know pension basics. Free resources like Money Saving Expert are helpful in breaking down the complexities; www.moneysavingexpert.com/savings/discount-pensions.?

2.????? Over 50? Access free online resources like Money Helper’s Pension Wise service, that gives you free impartial advice on your pension. Pension Wise: free pension guidance | MoneyHelper

3.????? Ask your employer for access to retirement education. Responsible employers should have tools within their benefits package to help employees build better financial wellbeing for the future.

4.????? Review the benefits of your pension scheme. Are there any additional savings schemes available to you that could offer more value to your contributions? Are you able to access a salary sacrifice arrangement that could help you save extra on tax?

5.????? Have a look at your pension statement. Knowing where you’re currently at in your savings journey can be effective in helping you create a retirement plan.

With people living longer than ever and costs continuing to increase, thinking about how to achieve a happy retirement has never been more important. Time is money when it comes to generating a sustainable retirement income, so it’s best to take action as soon as you can.

Are you a Local Government Pension Scheme member? You can acess some helpful videos about your LGPS pension here: Explainer Videos | Shared Cost AVCs (avcwise.co.uk)