As the population gets older and we all live for longer, planning for retirement has become much more important. The changes in population have resulted in the qualifying state pension age increasing, a reduction in ‘final salary’ pension schemes and a greater reliance on the individual to save throughout their working life for their retirement.
This chart shows how much you’d need to save from different ages in order to get a £20,000 annual income in retirement. This could be a large portion of your income if you don’t start planning early.
Payments are net of 20% tax relief. These calculations are based on a complex model that predicts the investment return over the lifetime of the pension, the value of an investment and income from it can go down as well as up and is not guaranteed.
How much income do you need?
This depends on your individual circumstances. The younger you are, the less likely you are to be able to predict your future circumstances and requirements in retirement, but saving into a pension gives you options.
If you are approaching retirement, you will probably have a better idea of your lifestyle, financial commitments, health, and dependants.
How much can you rely on the state pension?
Depending on your age, you may be able to rely on the state pension to top up your private pension. However, as the population is living for longer and drawing on the state pension for longer, its future for younger workers is unclear. The best thing to do is to make sure you have a private pension that can support your income needs and view the state pension as a bonus.