Britons have been urged to plan ahead and save up for their retirement as new figures show a person with the full new state pension needs an extra £285,000 in savings for their retirement.
Calculations from the PLSA (Pensions and Lifetime Savings Association) show a retiree who wants a moderate standard of living, with a car and a foreign holiday each year, will need an annual income of £23,300.
Researchers from Standard Life have estimated a person who receives the full new state pension, providing £10,600 a year, would need to find another £12,700 a year to cover their costs or around £285,000 in savings.
Dean Butler, managing director for Retail Direct at Standard Life, encouraged Britons to take on the “daunting” task of planning for their retirement finances.
He said: “Knowing that £285,000 is the amount needed for a moderate retirement is a good place to start and highlights the importance of consistent saving.
“Starting to save for retirement as early as possible in your career really helps, giving you more time to build up a decent pot, and a greater chance of taking advantage of possible compound investment growth.”
Even a person who would be content with a basic standard of living in retirement would need £12,800 a year in total income, which is £2,200 a year more than the full new state pension, so they would need £50,000 in savings.
A person who wants a comfortable retirement would need £37,300 a year to cover their bills, meaning they would need an extra £26,700 on top of their state pension or £530,000 in savings.
Mr Butler encouraged pension savers to look at buying an annuity as rates on the investment option have improved over the past year by 20 percent.
Annuities provided a guaranteed regular income over a fixed period, as opposed to drawing down from a pension, where returns are not guaranteed.
Mr Butler said: “The current economic environment has pushed annuity rates up, with Standard Life estimating rates have improved by 20 percent over the last year, meaning pensioners can generate larger incomes from their savings.
“The value and certainty offered by a guaranteed income seems to be becoming harder to ignore.”
Britons can also boost their retirement income by topping up any gaps in their National Insurance (NI) record, to max out their state pension payments.
A person typically needs 30 years of NI contributions to get the full basic state pension, of £156.20 a week, and 35 years of contributions to get the full new state pension, of £203.85 a week.
An individual can check how much state pension they are on track to receive using the state pension forecast tool on the Government website.
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