How much do I need to save in order to have the retirement I want? This question is something everyone should ask themselves at one time or another. Many people don’t know what they need to save, or what quality of life they would have with their savings. Automatic enrolment has been successful in getting more people to save for their retirement however it has also highlighted several important challenges and trends in retirement savings in the UK.
While automatic enrolment has increased participation it often starts with a low level of engagement from individuals. Many people may not actively consider their retirement plans or make informed decisions about their contributions untill a number of years later losing a lot of time they could have been contributing. There is also a lack of retirement planning in general, a significant portion of savers lack clarity about their retirement needs and goals. Many do not have a clear understanding of how much they will need in retirement, this lack of planning can lead to financial insecurity and a unfulfilled retirement.
The research from Loughborough University (July,2018) also suggests that overall financial capability and education may be declining, with fewer individuals understanding the impact of inflation on the real value of savings. A higher proportion of people tend to focus on immediate financial needs and desires rather than saving for the future.
The changes in pension savings such as autoenrollment, master trusts, annual allowance reforms, and changes in access to pension funds have transformed the landscape of retirement planning over the past 10 years or so. It is essential to have some understanding in order to adapt to these changes and have your retirement savings work for you effectively.
Retirement standards.
What are retirement standards, The retirement standards are three values provided by Loughborough University on how much you would need to live a Minimum, Moderate, or Comfortable life. This also provides you with a breakdown of how these standards would look. The table below shows you this information based on a single-person household or a couple.
​ | Minimum | Moderate | Comfortable |
Single | £12,800 | £23,300 | £37,300 |
What standard of living could you have? | Covers all your needs, with some leftover for fun | More financial security and flexibility | More financial freedom and some luxuries |
House | DIY maintenance and decorating one room a year. | Some help with maintenance and decorating each year | Replace kitchen and bathroom every 10 - 15 years |
Food | £54 a week on food (including eating out) | £74 a week on food (including eating out) | £144 a week on food (including eating out) |
Transport | No car | 3 year old car replaced every 10 years | 2 year old car replaced every 5 years |
Holiday and leisure | A week and a long weekend in the UK each year | 2 weeks in Europe and a long weekend in the UK each year | 3 weeks in Europe every year |
Clothing and personal | Up to £580 for clothing every year | Up to £791 for clothing every year | Up to £1,500 for clothing every year |
Helping others | £20 for each birthday present | £34 for each birthday present | £56 for each birthday present |
For a Couple (note the value does not double for two people)
​ | Minimum | Moderate | Comfortable |
Couple | £19,900 | £34,00 | £54,500 |
What standard of living could you have? | Covers all your needs with some left over for fun | More financial security and flexibility | More financial freedom and some luxuries |
House | DIY maintenance and decorating one room a year. | Some help with maintenance and decorating each year | Replace kitchen and bathroom every 10 -15 years |
Food | £96 a week on food (including eating out) | £127 a week on food (including eating out) | £238 a week on food (including eating out) |
Transport | No car | 3 year old car replaced every 10 years | 2 cars, each replaced every five years |
Holidays and leisure | A week and a long weekend in the UK every year | 2 weeks in Europe and a long weekend in the UK every year . | 3 weeks in Europe every year. |
Clothing and personal | Up to £460 per person for clothing and footwear each year | Up to £791 per person for clothing and footwear each year | Up to £1,300 per person for clothing each and footwear each year |
Helping others | £20 for each birthday present | £34 for each birthday present | £56 for each birthday present |
There is a growing need for financial education, tools, and guidance to help individuals make informed decisions about their retirement savings. Providing resources to help people understand their retirement goals, assess their financial needs, and choose suitable pension options is crucial for ensuring financial security in retirement for a larger portion of the population. Collaborating with a financial adviser is a proactive way to determine your income needs and desires for retirement, this will be a tailored plan for your unique financial situation. The retirement living standard is a fantastic way to understand your baseline for savings and what you might want to do in retirement however with financial advice the plan can be more specific and will allow you to cover more than just spending.
Contact use today to set up a free no obligation face-to-face or telephone meeting.
0116 299 3000 or Enquires@psafinancial.co.uk