Research suggests the exact amount needed for retirement (Image: GETTY)
How much money someone may need to retire heavily depends on their desired lifestyle and personal circumstances. For example, do they have a mortgage or any dependent children?
Even with an increased state pension, research suggests that millions of people will not have enough money to cover their day-to-day living costs, but there are steps people can take to avoid this.
First, people need to establish how much money they will need in their retirement, then work out how they are able to save.
How much is needed for a comfortable retirement?
Research from the Pensions and Lifetime Savings Association revealed that a single pensioner needs £23,300 a year of income for a moderate living standard.
A retired couple now need a minimum of £19,900 a year – up £3,200, and for a comfortable retirement, a retired couple would need £54,400 a year for a comfortable lifestyle.
State pension age is currently 66 in the UK (Image: EXPRESS)
With a comfortable retirement, retirees could enjoy three weeks in Europe for a holiday, the budget to replace their kitchen and bathroom every 10 to 15 years, £56 on both birthday presents and a change of cars every five years.
The type of retirement someone can have depends on the size of their pension pot. Experts at PensionBee calculated what different retirement pot sizes could pay out.
For example:
- a £285,000 pot could pay out up to £20,000 per year for 20 years.
- a £425,000 pot could pay out up to £30,000 per year for 20 years.
- a £575,000 pot could pay out up to £40,000 per year for 20 years.
After the state pension is taken into account, pensioners need to find ways to supplement their income to make up the difference.
For single pensioners wanting a moderate living standard, they would need £23,300 a year, and after the state pension is taken into account, pensioners will need to find ways to supplement their income with £12,700 a year.
A new study showed that the average pensioner could use this up by the time they turn 78 – despite the fact that the average life expectancy for those over the age of 65 in the UK is 85.
Britons can invest to make income for retirement (Image: GETTY)
The ‘Age of Ruin’ report, conducted by financial planning experts Money Minder warned that pensioners are now likely to run out of money seven years before they reach the average life expectancy age.
Ray Black, managing director of Money Minder, said: “This report highlights the sobering reality of life without adequate pension savings, and with life expectancy fluctuating across the UK, some pensioners actually run the risk of running out of money years before they hit the life expectancy age.
“While everyone will have access to the state pension, you can’t rest on the blind assurance that you’ll have enough money with that to be able to maintain the same standard of living as you do while working.
“It’s important to regularly review your pensions and investments, not only so you can purchase home improvements, cars and holidays after retirement, not only for the benefit of ourselves but also for the well-being and security of our families and loved ones.
“A pension drawdown option can let you access your pension funds while still keeping them invested – potentially with the scope to earn more over time. For people who are happy with keeping their pension fund fully invested, it has the potential to substantially grow in real money terms.”
How to boost your retirement income
Experts at PensionBee explained that people can top up their state pension by paying for voluntary contributions.
A man born before April 6, 1951, or a woman born before April 6, 1953, can make a Class 3A voluntary National Insurance contributions to top up their state pension.
How much they pay depends on how much extra money they want to receive from their state pension and how old they are.
Delaying taking the state pension is another way people can boost their savings and can help ensure a comfortable retirement.
If people qualify for the basic state pension and defer it for a year, the amount they’ll receive will increase from £156.20 a week to £172.44 a week (2023/24).
They could qualify for a lump sum payment if they defer for a year or more.
If they qualify for the new state pension and defer it for a year, the amount they’ll receive will increase from £203.85 a week to £215.67 a week (2023/24).
Individuals need at least 10 years of National Insurance contributions to qualify for the new state pension and 35 years to receive the full amount.
To get the full basic state pension people will need a total of 30 qualifying years of National Insurance contributions or credits.
A pension isn’t the only source of income people could rely on in retirement. They can also receive money from property, savings, investments and part-time work.
