Recent analysis from Quilter has estimated that for a single person to enjoy a comfortable retirement they must have a pension of £645,000. This number was based on an escalating income of three percent and an annuity rate of 5.1 percent based on someone who is of state pension age, which is 66. These new pension calculations originate from PLSA’s Retirement Living Standards research which was recently updated to factor in the rising cost of living.
According to Quilter, a comfortable pension for a single person would need to see someone on an annual income of £26,700 per year on top of the state pension, after tax.
With the return of the triple lock, the full new state pension is due to exceed £10,600 annually this year.
Anyone looking to acquire a “moderate” retirement lifestyle would need to accumulate a pension pot of around £301,000.
Someone seeking to achieve a minimum lifestyle which requires someone to have a pot of around £44,000.
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Jon Greer, the head of retirement policy at Quilter, reminded Britons of the importance of “starting young” when it comes to saving money for their pension.
He explained: “While these figures are only a guide it is worth noting that you need to build up a relatively significant pension pot just to achieve a moderate lifestyle.
“Starting young is key as pension pots have a compounding effect that helps money grow much more the longer it is in the pot.
“It is worth noting that the figures from the PLSA all assume that retirees are living rent or mortgage free in their homes. Therefore, while these numbers make sense now, for future generations these figures will have to rise considerably.”
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The pensions expert noted that the rising cost of property and social care will likely mean future generations will have to spend more in their retirement than previous ones.
Mr Greer added: “This is due to soaring house prices meaning that many struggle to find the money to buy a house or are forced to takeout marathon mortgages with terms that stretch into their 70s to achieve lower monthly mortgage payments.
“Similarly, the PLSA’s figures also do not account for the potential costs of requiring social care. According to the ONS, male healthy life is around 62.8 years and for women it is 63.6.
“Meanwhile life expectancy was 79.0 years for males and 82.9 years for females meaning that many people will spend a significant proportion of their retirement in ill health potentially needing to access costly care.”
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However, there are ways people can boost their pension payments to secure a better retirement for themselves.
One of the ways people can increase their pot is by tracking down old workplace pensions which they have forgotten about.
Research by the Pensions Policy Institute (PPI) found that the value of lost pension pots in the UK has risen by 37.7 percent, or around £7billion, since 2018.
Over 2.8 million pots are now considered lost which is a sharp increase of 75 percent over the last four years.
To track down a lost pension pot, savers can use their National Insurance number, as well as the names and addresses of their previous employers, via the Government’s Pension Tracing Service.
Those approaching retirement should also keep on top of their retirement savings to make sure they know how much they are eventually getting.
Once all pension pots have been found, savers may want to consider merging all their current and previous plans together, however, it’s important to be aware this is not right for everyone.
By having all of someone’s pension savings in one place, retirees potentially reduce the charges they pay.
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