£15,000: the cost of a comfortable retirement
A new report has shown that the threshold for a comfortable retirement is around £15,000 a year.
Pensioners living on a household income of £15,000 to £20,000 enjoy a “significant shift in [their] quality of life compared to those with less,” according to the latest study from the National Employment Savings Trust (NEST).
The £15,000 ‘tipping point’
The study found that 52% of pensioners who had a household income of up to £15,000 a year were satisfied with their life. When that income rose to between £15,000 and £20,000, 67% said they were satisfied.
24% of those living on less than £15,000 said they were financially comfortable, while 43% of those living on between £15,000 and £20,000 described their financial situation as comfortable.
While only 35% on £15,000-£20,000 a year said that their income gave them the ability to fund the kind of retirement that they were hoping for, that figure dropped sharply to a measly 14% of those living on less than £15,000.
A third of people living on less than £15,000 said that they find it difficult to afford their household energy bills while a quarter find it difficult to afford groceries. These figures dropped to 15% and 9% respectively when income raised to £15,000-£20,000.
Pensioners’ overall sense of satisfaction with life was found to increase an average of 7% per £5,000 of household income.
There were also reductions in anxiety as annual retirement income rose, and people tended to feel that what they did with their life was more worthwhile.
Take control of your pension with a SIPP
Automatic enrolment pension
The new workplace pension scheme means that UK workers aged between 22 and the State Pension age who earn more than £10,000 a year will be automatically enrolled to pay a contribution of their earnings into a pension pot. To find out more, read Workplace pensions: what it means for you.
In today’s money, NEST estimates that a 22-year-old earning £20,600 with qualifying earnings of £14,828 who retires at 68 (the current State Pension age) could build up a final pot of £124,000. This would give them a basic retirement income of £6,760 a year. Added to the State Pension of £7,500 a year, this would total up as a yearly income of £14,260.
If a 30-year-old with the same qualifying earnings began contributing today, they would build up a basic retirement income of £4,290, giving them a total of £11,790 a year, while a 40-year-old in the same situation would be looking at a basic retirement income of £2,710 a year plus the State Pension – a total of £10,210.
Take control of your pension with a SIPP
Ways to save
NEST has suggested seven quick ways that people can build up extra savings. The figures given in the third column are worked out for a 22-year-old saving up between now and when they reach 68.
|
Weekly, if you: |
Each week you could save: |
If you put this towards your pension you could build up: |
|
Cut out one coffee shop coffee |
£2.80 |
£11,800 |
|
Had one less pint |
£3.50 |
£14,800 |
|
Switched your mobile phone tariff |
£3.80 |
£16,100 |
|
Cut out a packet of cigarettes |
£7.40 |
£31,400 |
|
Worked out at home instead of paying for gym membership |
£8.50 |
£36,100 |
|
Cooked at home at least once instead of getting a take-away or eating out |
£12 |
£50,900 |
|
Brought a packed lunch to work every day |
£15 |
£63,700 |
Source: NEST
What do you think? Is £15,000 a year enough for a comfortable retirement? Do you think you are saving enough? Let us know your thoughts in the comments box below.
More on pensions:
Why blowing your pension may leave you better off
Workplace pensions: what it means for you
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Comments
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To overtone and mldrewreborn I left the horses out of my table, because they get complicated, expenditure/income is lumpy, (Imagine needing a new tractor or new stables.) and my net expenditure on the fields and the horses over the past 52 weeks was actually minus £12. I don't own any horses (Inheritance tax, capital gains and all that.) I am too old to ride competetively. Those who ride the horses are responsible for their keep, and for their daily care. I sometimes pay the big vet bills! I have plenty of hay off my fields each year. Horses live on my land. I enjoy helping others by ferrying their horses around, which makes me friends and gets me the odd hot-dog or bottle of lemonade. Because I live on a hillside in Wales I feel no need for holidays. I have not had a passport for over ten years. If I want to meet people from other places, other lands, I can go down to the local pub and talk to the visitors. I did travel the world "on business", so I have seen more than enough of the outside world. meldrewreborn - I enjoy your contributions; please keep them flowing.
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Kent On average my wife and I spend as much on holidays as you do on everything and remember the survey didn't find much difference between single and couple households responses! My data goes back to 1997.The problem is the definition of comfortable and our own perspective of it. The survey has done some good work in dispelling how much is needed to live comfortably in retirement, but one cannot escape the fact that propery ownership makes a big difference to retirees and income over and above the state pension helps a lot. We must not forget that with the changes to rules on qualifying years for pensions introduced comparatively recently, the lot of women in retirement will be on average a lot better than those who went before. And the changes will take many years to have an effect in these sort of surveys - only the youngest pensioners will have seen the benefit at the moment. If the survey had categorised the non state pensions into public sector and private sector another huge imbalance would have been revealed. Of those surveyed "50% who have no additional income say understanding what it’s like to be retired makes them wish they’d saved more" and "Regardless of income, the vast majority of pensioners with more than the State Pension say the additional money has made a difference to their quality of life." But even those on £40K+ pa wanted more - on various measures they're only 80- 90% satisfied. There's no accounting for folk! I bet they're all politicians - divorced from the reality of the real world.
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Just to present a counterbalancing view: - I run a spreadsheet of my income and expenditure, from which I have spent about £6,700 over the past 52 weeks. So I don't see why £15,000 is considered necessary for a "comfortable retirement." Perhaps I should declare that I am single, have no mortgage, and one day may need to shell out for another car. (The current one cost me £4,000 four years ago, but I expect it to last another six years at least, and that includes towing my horsebox a lot.) However, I do live in a rather large four bedroomed house, in a few acres, with agreable views over the valley. My expenditure has been: - 1,329 Council Tax 1,257 Food 908 House & Garden 634 Heating Oil 528 Car Tax, Insurace & Breakdown Cover 468 petrol 333 Electricity 280 Meals out 270 Phones & Broadband 188 Personal (Including anything not otherwise listed.) 170 Water 106 Medical (Private Dental) 97 Days out 86 Clothes 28 Car Servicing 27 House Insurance 6,708 TOTAL So my State Pension does me nicely, and I can save a bit for the next car.
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28 May 2014