How much do you think you will need in retirement? What lifestyle choices would you like to make? Well, a new report has found that it is necessary to have a minimum of £15,000 a year to enjoy a comfortable retirement.
Looking at factors including whether pensioners can afford to pay the bills as well as their general satisfaction in life, National Employment Savings Trust (NEST) carried out a study which found that those retiring on more than £15,000 enjoyed a much improved quality of life than those managing with less.
They also found that pensioners' overall satisfaction with life increases by an average of 7% per extra £5,000 annual household income they have, up to a maximum of £40,000 after which there seems to be little change. Having enough to cover the essentials, and perhaps some little treats, will give peace of mind to retirees and 43% of those questioned living on a household income of between £15,000 and £20,000 say they are financially comfortable, compared to just 24% of those living on less than £15,000.
A third of people living on less than £15,000 find it difficult to afford their household energy bills and a quarter find it difficult to afford groceries, however, this drops to 15% and 9% respectively for those above the £15,000 threshold. And women are more likely than men to be living below the threshold with 24% living on £10,000 or less, compared to just 10% of men, while a further 41% of women feel their annual household income is not enough to give them the retirement they had hoped for.
Commenting on the findings, Tim Jones, CEO of NEST, said: "Retirement is now more likely to be a gradual shift than a one-time 'cliff edge' event. Many people will have more time to save up and the latest reforms to pensions mean there's more choice than ever for accessing retirement savings during later life. Our findings underline the message that tomorrow's worth saving for.
"Saving for later life is something we all know we should be doing but it can easily slip to the bottom of the priority list. With automatic enrolment most workers will be given a helping hand to get started and, with employers topping up workers' pots, it will go a long way to improving quality of life in retirement."
Making little changes can have a big impact on your pension pot, and NEST looked at what effect cutting back on a few luxuries and instead investing it in a pension could have on a 30-year-old's savings by the time they retire at 68.
Having one less pint a week could build up to as much as £14,800 by the time of retirement, while if you brought a packed lunch into work every day rather than, on average, spending £15 a week, this could build up to a colossal £63,700. While you may notice these minor changes at first you will soon get into routine and won't miss them, and by the time you reach retirement the extra income these savings will generate will have a huge effect on your quality of life.
Retirement may seem a long way off, but now is the time you need to be putting plans in place to ensure your pot has time to grow. If you make a few little sacrifices and make regular payments into your scheme then you will build up a tidy little sum which which will enable you to enjoy a comfortable later life.
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For more information on retirement check out our retirement guides
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