Having enough saved in a pension fund to cover your retirement years is essential, and it’s something that we are constantly being told to do, especially with the introduction of auto-enrolment in a workplace pension.
However, according to a report by the Office for National Statistics (ONS), we may need to start saving for our pensions earlier to ensure that we are saving enough to live on – which is around £21,770 on average a year for a retired household according to the results of the report.
Is saving £20,000 Feasible?
Although it seems like a lot of money to save, it is possible to save around £20,000 for your pension – but you will need to start early.
Young people are guilty of not thinking about the future and putting money aside, which is one of the reasons that the auto-enrolment system was put into place. The ONS have reported that by the age of 25, individuals should be putting away a large proportion of their wage – up to several hundred pounds.
The older you get, the harder it will be to reach this target, which is why it is best to start your pension saving early.
What About State Pension
Many people don’t feel as though they need to put a chunk of their wage towards their pension every month because they believe that they will automatically qualify for state pension once they reach retirement age.
However, many individuals from the next generation are not expected to reach the threshold to meet the government requirements for a state pension, and even those who do will only receive just over £8,000 per year.
If you are looking to reach the £20,000 a year target and you are aged 25 or under, the ONS have advised to put away around £246 per month in order to ensure that you are on track.
The report figures show that a pension saver aged 25 would only need to contribute 14% of their salary to hit the £20,000 target, but those aged 35 will need to contribute 23% to make the target possible.
While it will be difficult for those to start saving aged 45 or over, there are options which can be utilised instead. For example, if an individual is prepared to delay taking income for five years past the current age which is able to benefit from the state pension, they will be able to reduce their pension contributions to 28% of their earnings.
While working well into their 70s isn’t something that many people want to do, it is an option for those who have left it too late to live off their pensions comfortably.
Worrying about your pension is understandable, and here at Burton & Fisher, we want to make sure that you’re investing your money in the right way to allow you to live comfortably once you hit retirement age.