No, you can't retire on £50,000!

£50,000 will give you a paltry pension for your retirement.
You could do a lot with £50,000. You could fund yourself through a three-year university course (including tuition fees and living costs).
Travel the world on a budget for up to five years. Or slap down a 25% deposit on a £200,000 property.
Yes, £50,000 can go a long way.
But there is one thing you can’t do with it. You can’t fund a comfortable retirement.
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The £50,000 question
Worryingly, many people think you can, especially younger people. When insurer Aviva asked 16 to 24 year olds how much they wanted in their pension at retirement, the average figure was £48,400.
Young people can be forgiven for being so wide of the mark. Retirement is decades away. They probably haven’t given the subject much thought.
But they should. You will need a lot more than £50,000 in your pension pot if you want to live your final years in comfort and ease. And unless you start saving when you’re young, it will be a struggle.
How much!
Let’s say you are retiring today with a £50,000 pension pot, and used the money to buy an annuity, an income that lasts you for the rest of your life.
At age 65, that £50,000 would buy you an annuity worth just £2,800 a year.
That works out as a meagre £233 a month. Or around £54 a week.
You would get even less if you bought a joint life annuity to cover your partner after you die, and less still if you wanted that income to rise in line with inflation.
These numbers look particularly bad because rock bottom interest rates have slashed the returns on annuities.
These figures may improve in future. Let’s hope so.
Tricky maths
You should also get your state pension on top, which is currently £107.45 a week, giving you total income of around £160 a week. That’s just £20 a week more than you would get if you claimed pension credit, the government’s mean-tested measurement of poverty in retirement.
It works out as £8,400 a year, roughly one-third of the national average full-time salary of £26,200.
The sums don’t add up. £50,000 into the rest of your life just doesn’t go.
Wiser guys
Youngsters aren’t the only ones who are naive about how much they need for their retirement. Those aged between 25 and 34 set their pension target at a slightly higher £78,000.
Between 35 and 44, the figure rises to £88,000. And between 45 and 54, people reckoned they needed £102,000 for a worry-free retirement.
Claim your free wealth report, and keep track of how much you'll have available in your retirement. Try Plans, the secure application from Lovemoney.com, free for 30 days >
The time is now
Young people may be naive, but they do have one thing on their side. Time. Many people squander this, because they think saving for a pension is something they can do later.
The truth is, there is never an easy time to save, because when you’re older, you have family commitments, such as a mortgage and children. So don’t hang about.
The earlier you start, the easier it will be. If you start paying into a pension, say, 25, you need to save just £91 a month to have £100,000 in your pension pot by age 65 in today’s terms. This figure assumes you get 3.5% investment growth a year after charges and inflation. If you wait until age 35, you need to save £148 a month. And if you delay until 45, you will need to save £266 every month. That’s almost three times as much.
Start with small amounts, if that’s all you can afford, but please start.
What’s the forecast?
Older people should start by working out out exactly how much they have already saved. Incredibly, just one in 10 people know how much their pension is worth, according to new research from Nationwide.
Dig out the latest annual statements for your company and personal pensions, to see how much each is worth. The Pension Tracing Service can help you track down old plans. You should also get a state pension forecast.
You can do it!
Saving enough for a decent retirement may sound daunting, but the government gives you a helping hand, by granting tax relief worth 20%, 40% or 50% of your contributions, depending on your tax bracket.
If you have access to a company pension scheme, your employer may give you a further boost, by matching your contributions with a payment of its own.
From October, the new auto-enrolment scheme should ensure that millions get access to a company pension for the first time, including employer and government contributions.
Don’t squander it.
If you don’t trust pensions, then invest using your tax-efficient Isa allowance instead.
One retirement, going cheap
I wish I could be the bearer of better news, but there isn't much of that around, especially with the Government getting cold feet over its plans for a £140 a week state pension.
In truth, even £100,000 isn’t enough for a comfy retirement, given today’s atrocious annuity rates. At age 65, it would buy you income worth just £5,700 a year.
That isn’t much return for half a lifetime of saving, but frankly, what alternative do you have? You want to have a comfortable retirement, if you possibly can.
And you won’t buy one of those for £50,000.
Intelligently monitor how much you'll have available to you in retirement, and track your current wealth with Plans, the secure application from Lovemoney.com Try Plans free for 30 days and get your personalised wealth report >
For a different take on how much you need to save for your retirement, read It doesn’t cost much to retire well.
More on pensions:
How much you need to save for retirement
Become a pensions expert in five days
Auto enrolment: how NEST will invest your compulsory pension
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I started work when I was 20 years old... By the age of 50 I will have paid my 30 years NIC..... I am currently aged 35 so the chanced are I will not qualify for my state pension until I am aged what 67, 68, 69 or 70? Say 70.... So can some one please explain where the extra 20 years worth of NI Contributions have went to? Also by the looks of things NIC and Income Tax are being replaced by one individual tax so that my pension can be taxed at a level which includes my (previously named by this time) NI Contributions which should stop at retiring age???!!!!! You could not make this stuff up!!!!! All things considered we are actually paid around 20% of our Gross Pay and the rest is spent on taxes - Direct or Indirect.... And they want us to used half of this (10% of £1500 salary as per above calculation for a 35 year old) to put into a pension? My sides are freaking aching with laughter here!!!!!
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@skintsod is right. Just maybe, Mark-W, you thought the married pension was in addition to whatever each of the pair is entitled to from their own contributions in addition to the basic State pension? If so, sadly you are wrong. £16800pa is not a lot for a couple to live on, particularly as apparently frightening numbers of pensioners still have mortgages when they retire. In some instances these might be equity annuity plans, in others helping out their offspring, or even just having taken out equity in their own property to fund other things during the boom years. @Basia02a is also correct; none of the articles I have seen has taken into account the various extra bits which can be added to the State pension (for example, graduated retirement benefit, the various flavour of SERPS/State second pension) as obviously these vary more or less infinitely for each individual. About half my State pension will be made up from those, and as I worked overseas for some years and for my years here was in a traditionally poorly-paid industry my guess is that anyone retiring since a couple of years ago probably has more add-ons than I do. Pension Credits are probably of more help to those people who have fewer add-ons for a possible variety of reasons - my later working years fortuitously coincided with the temporary concession that was made, ostensibly to help women who had for some years made the married women's contribution or had not qualified for NICs credits during their child-rearing years but was also available to men, of the ability to buy extra years. I assume that this came to an end to coincide with the reduction in the maximum number of years of NICs contributions to 30, for both men and women. The global economy constantly develops, inflation is never going to go away forever, and however sophisticated the models the actuaries use, they are never going to be able to take into account future changes in tax structures so the projections on any pension are, IMHO, pure fantasy. That is not necessarily a reason to ignore the need to plan, by any and every means, so that we can be self-reliant financially in our old age. Soon more pensioners will be childless, and I for one do not want to have to rely on the State to provide the small comforts which take on more significance as one's horizon shrinks and perspective lengthens. Be warned! Previous contributors have offered good advice. @Iamcoldsteve should note @mgbboy55's comment and especially PS. Long ago before the internet and forums such as this, when we were all less sophisticated, it was easy for the insurance companies to sell pensions through companies and to individuals based on annual increases in contributions. In theory of course this should work, but there are two major problems with the theory. The first is the calculations that actuaries have to make on their behalf, which coupled with what was IMHO an erroneous Court ruling has been a disaster for many, the other is that none of us knows what will happen to us in this life and if for whatever reason you cannot keep increasing your contributions to your pension, it cannot function as intended. This has also been a major source of disappointment, not to say grievance, for many. Following changes to the ISA rules, as far as I can see the only reason now to save into an ISA is to roll-up the income which is presently tax-free within it, which after the pension threshold is passed can be paid out; this must be a big advantage. Those who have plenty of cash to risk could also take advantage each year of their capital gains allowance, in order to rachet up their cash available for investment, but they must be few and far between ... .
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No wonder so many people do the lottery!
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05 October 2012