UK residents need at least an extra £26,000 in addition to their State Pension to live a ‘comfortable’ lifestyle during their retirement, according to recent data.
The research was carried out by Standard Life, which used the MoneyHelper annuity tool from www.moneyhelper.org.uk to work out how much people would need in their pension pot to meet that standard of living when they retire.
The company said to have a ‘minimum’ standard of living, which would mean enough for the basics and one week’s holiday a year in the UK, but no car, people needed an income of £12,800 a year.
Currently, those receiving just the New State Pension get £10,600 a year – this means they will need to have an extra £2,200 worth of income to meet that threshold, the company said.
It also found that for a ‘moderate’ standard of living in retirement, which allowed for a car and one holiday abroad per year, retirees would need an annual income of £23,300, meaning they would have to find a further £12,700 on top of their State Pension.
Then for a ‘comfortable’ standard, they’d need £37,300 per year, so another £26,700.
The definitions of ‘minimum, moderate and comfortable’ are taken from the Pension and Lifetime Savings Association (PLSA)’s Retirement Living Standards.
The numbers may only be a benchmark guide but are an indicator of what people might expect if they have only the State Pension to fall back on, as so many do.
Commenting on the research, Standard Life’s managing director for retail; direct, Dean Butler, said: “Life costs more in different parts of the country, for example, and the figures don’t account for housing costs which a significant minority of retirees currently have and which more are predicted to have in the future as longer-term mortgages surge in popularity.”
But he pointed out the numbers were just a guide and individual circumstances would vary.
As ever, it is another timely reminder to think about your pension provision as early as possible, to avoid any unpleasant ‘surprises’ later on.
More now have private pensions they pay into due to the legal requirement for them to be automatically enrolled into workplace pensions.
However, Standard Life points out that more than the auto-enrolment minimum will be needed to aspire to a ‘comfortable’ retirement.
It is advisable to think as soon as you can about provision for your retirement and to also consider taking out additional private pension schemes that you can pay into monthly or with regular lump sums, whichever is preferred.
If you are looking to do this, it is best in the first instance to speak to an Independent Financial Adviser (IFA) to find out more about the options available to you.