A comfortable retirement is a goal for millions, but can often only be achieved through forward planning. With the state pension increasingly viewed as a safety net, individuals are often encouraged to make their own provisions through personal or workplace pension saving.
However, new research has shown just how much pensioners may need when it comes to retirement income for this year.
In March 2022, a 67-year-old retiree with a full state pension needed a pension pot of just over £540,000 to provide them with a “comfortable” retirement income, according to RBC Brewin Dolphin.
But this March, the wealth manager suggests a pot of £630,000 is needed – which is a jump of £90,000 more Britons will need.
Inflation continues to run high, creating financial issues for many Britons who are grappling with larger costs.
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Recent data from the Office for National Statistics (ONS) shows inflation is running at 10.4 percent.
The cost of a “comfortable” annual retirement has risen 11 percent from £33,600 to £37,300.
Carla Morris, financial planner at RBC Brewin Dolphin, said: “For those approaching retirement they need to be aware that if their pension saving remains at 2022 levels they could run out of money earlier if they maintain a 2023 level of income of £37,300, due to the increase in inflation.
“In this example, the £540,000 pot could run out seven years earlier.
“It can be overwhelming trying to save adequately for retirement but starting as early as possible really helps, investing for the long term gives your money the greatest chance of growing in value. “
But how can Britons build this pension fund to ensure they have enough for retirement?
The company states a 40-year-old with a pension pot of £120,000 today would need to put roughly £980 per month into their pension to retire with £630,000.
This is assuming four percent growth and two percent inflation.
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However, if the example were to shift to five percent growth after charges, only £720 per month would be needed.
Ms Morris states this shows the “power of compounded long-term returns”.
It is worth noting what constitutes as a comfortable retirement is subjective, as different people will have varying needs, requirements and dreams.
Ms Morris continued: “For some an annual income of £37,300 will be plenty.
“But for others it won’t cover all their expenses.
“Only by running through your expenditure and lifestyle goals will you be able to get a clear picture.”
Consequently, the expert encouraged Britons to speak to a financial adviser about their pension and retirement goals.
These professionals are likely to be able to provide tailored guidance to suit a person’s needs.
