According to the Office of National Statistics (ONS) the average retired household spends just over twenty thousand a year at £21,770. This begs the question to receive a £20,000 per year pension, how much should you saving per month?
Age is the Key to a Good Pension
To get an understanding of how much you should set aside for your pension, it is important to understand that the earlier you start the cheaper it is. The bigger your pension pot the better your retirement will be and the better quality of life you will have.
Working the basis that you will be paying into a defined contribution (DC) scheme, the following should give you an idea of how much you need to save every month. The ages shown below, are starting ages.
- Age 25 – £246 per month
- Age 35 – £404 per month
- Age 45 – £826 per month (Man)
- Age 45 – £861 per month (Woman)
If you delay claiming your benefits until you are 72 the amount needed to be saved per month changes to:
- Age 45 – £492 per month (Man)
- Age 45 – £509 per month (Woman)
This will give you around £12,000 per year from your DC pension scheme, the remaining £8,000 per year coming from your state pension. The amounts required for your DC pension scheme are net of tax.
The figures are also based on achieving the typical level of investment growth for a default investment strategy. The figures also depend on the payout increasing with inflation as well as granting a 50% income to a surviving partner. Under these assumptions this level of saving has a 50/50 chance of giving a return on investment of £20,000 per year.
Making your Savings go Further with Award Winning Financial Planning
There is always an element of risk with every type of investment, and as you can see the dice still have to roll favourably to get the £20,000 per year figure. Why not put the odds more in your favour by using my award winning financial planning. Together we can look at what you’re saving per month and use it to build up your pension pot giving you a better future when you retire.
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