MILLIONS of pension savers are at risk of a retirement “cliff edge” when they stop work as just 9% are on track for a comfortable lifestyle in their later years.
New figures reveal that savers need at least £13,900 a year in retirement, according to the latest Retirement Living Standards published by Pensions UK.
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But experts have warned that without taking action those saving for retirement could be forced to live “on a pittance in their later years”.
The figures factor in how much you will need to spend on household bills, groceries, travel, car costs, going on holiday and clothes.
A single person now needs around £13,900 annually for a minimum retirement, while two people need £22,500.
This is enough to cover all of your basic needs, with a small amount left over for fun and a week long holiday in the UK.
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Meanwhile, a moderate standard will set a single person back £32,700 a year or £45,400 for a couple.
For this amount you will be able to enjoy a monthly meal out, a fortnight all-inclusive holiday in the Mediterranean and a long weekend off-peak break in the UK.
Those who want a comfortable lifestyle will need to fork out around £45,400 each, while couples will need to find £62,700.
This gives them a fortnight half board in the Med and three long weekend breaks in the UK.
Charlene Young, senior pensions and savings expert at AJ Bell, said: “Without taking control of their pension pots, increasing contributions and making the most of the tax perks on offer, those currently saving for retirement will be forced to choose between working far longer or living on a pittance in their later years.”
Industry trade body Pensions UK warns that it expects around 82% of the population to reach at least the minimum standard of living in retirement, while just 23% will reach a moderate lifestyle.
Worryingly, just 9% will enjoy a comfortable lifestyle.
It warned that this is out of step with what some people expect for their retirement.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “The latest update to the Retirement Living Standards underlines a clear reality for many people, today’s saving levels will not be enough for the retirement they expect.
“Without action, too many risk facing a cliff edge drop in income when they stop work.”
She added that without the higher levels of saving, there is a risk that many will see a big drop in income when they stop working.
The calculations provide a guideline to help savers budget for later life and to use as a measure to keep on track with their retirement.
But you may need an even larger pot if you don’t own your own home and are still renting, or still have a mortgage to pay off.
These levels of how much you need saved for retirement do not factor in any housing costs.
This means it’s important for individuals to use the standards as a guide and adjust them to reflect their own situation.
Check your pension forecast to see how much money you could get a year in retirement.
If you are not saving enough and are able to then increase the amount you are putting away each month.
You can also ask your employer whether it will match you if you increase your contributions.
Saving for retirement
Anyone planning their retirement needs to do some careful calculations about how much they will need to afford the lifestyle they want.
A good starting point is the government’s state pension age calculator, which will tell you when you will receive your state pension.
Visit gov.uk/state-pension-age to find out more.
Pension calculators can also help you determine how much money you need to save to have the pension pot you want at retirement.
The earlier you start saving, the easier it is as your money grows longer.
And you’re not on your own when saving for retirement.
Your workplace will almost certainly contribute some money to your pension pot, too, and you get tax relief from the government, which reduces the amount you have to pay yourself.
