As a Business Manager for the Temps Division of a recruitment agency, it has come to my attention that some people have no real understanding of what they need to save to have a successful and stress-free retirement! With the first of our candidates auto-enrolling in our pension scheme in April, I felt this was the best time to gather some facts and figures and share the true cost of not saving, and the benefits of when you do!
What should I be saving a month?
Information from the BBC suggests that it is our generation that got out the habit of saving, the figures may come as something of a shock. At the age of even 25 you should be putting away several hundreds of pounds a month. And if you haven’t started saving by the age of 40, reaching your desired target is going to be a real challenge.
So, someone who starts saving at the age of 25 would need to put away £246 a month, net of tax. After 20% tax relief, that sum is actually worth £307. In short, the earlier you start to save the better off you will be!
What is a pension?
A pension is not necessarily what people think it is, and it most certainly isn't only for old people. The money saving expert summarise what a personal pension is quite simply: It is just a tax-free pot of cash you, your employer (and sometimes the Government) pays into, as a way of saving up for your retirement.
At retirement, you can draw money from your pension pot or sell the cash to an insurance company in return for a regular income until death, called an annuity.
So, what is auto-enrolment? The auto-enrolment rules mean that if you're an employee, your employer will be forced to offer you a pension scheme. By 2018 all employers by law will have to contribute to their employees' pensions. You have the option to say ‘no’ to auto-enrolment if you don't want to join. But it's an opt-out rather than an opt-in scheme, so if you do nothing, you'll be opted in. If you stay in you will have your own personal pension when you retire. Your pension will belong to you, even if you leave your employer in the future.
How much do people spend in retirement?
In a survey from 'Which?' Households spent a shade under £2,200 a month, or around £26,000 a year, on average. This covers all the basic areas of expenditure and some luxuries, such as European holidays, hobbies and eating out. Aiming for this level of income will provide a good platform for your retirement.
You’d need £39,000 a year if you include luxuries such as long-haul trips and a new car every five years. Travelling and holidays are a very important part of retirement for our members, with people spending nearly £4,500 a year on this part of their life.
Below shows the average spend for a Comfortable Lifestyle and a Luxurious Lifestyle.
In summary the best thing to do is to start saving and start saving as early as possible. There are huge advantages of having a pension scheme, both work and personal, just make sure you research the best option for you. And lastly make a decision now of how you would want to spend your retirement, so you can save accordingly!
I have provided links below with articles that go into further detail of each topic! I hope this blog has given you useful information and something to think about!
How to get a pension of £20,000 by the time you retire: http://www.bbc.co.uk/news/business-38609422
How much will you need to retire? https://www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/guides/how-much-will-you-need-to-retire
Pension need-to-knows: https://www.moneysavingexpert.com/savings/discount-pensions