Although there are many challenges on the household finance front at the moment, the start of a new year always provides the perfect opportunity for a financial health check; and a key element of any finance MOT will inevitably be an honest appraisal of your financial fitness for life after work.
Retirement income targets
A good starting point for any retirement health check is to consider the lifestyle you want to enjoy when you retire and how much it will cost to fund that standard of living. Recent research1 provides an indication of how much retirees typically spend, with a two-person household requiring an annual income of around £28,000 to be ‘comfortable’ or £45,000 if they want to include luxuries such as long-haul trips.
Many not saving enough
Worryingly though, a report2 from The Pensions and Lifetime Savings Association (PLSA) suggests many people are still not saving enough for retirement. They estimate that around half of all savers risk missing targets set by the Pensions Commission in 2005, including a significant proportion on average earnings. The report also suggests one in five households risks failing to achieve even a ‘minimum’ standard of living in retirement.
‘Set and forget’
The introduction of auto enrolment ten years ago did provide a big advance in terms of normalising workplace pension provision. This success, however, has not translated into genuine pension engagement, but rather encouraged a ‘set and forget’ mentality, with people still often unsure how much they actually need to save; and, for many, relying solely on auto enrolment contributions will not guarantee a comfortable, let alone luxurious, retirement.
We’re here for you
Whatever your age, retirement planning needs to be on your financial radar, as starting to save at the earliest opportunity provides the best chance of accumulating a pension pot capable of funding the retirement you deserve. Let’s make 2023 the year you get your retirement savings plans firmly on track.
The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.