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.
[SPOTLIGHT]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