Omnium Wealth Management

Over 40s unaware of retirement costs

80% of people aged over 40 don’t know how much money they need in their pension pot to fund their retirement, according to Saga Investment Services.

40% of those surveyed said they had no idea of the cost of a basic lifestyle (with food and bills paid but little disposable income leftover) in retirement.

Saga estimates that people could be underestimating the size of the pot they will need by as much as 50%.

Sally Merritt, Head of Product at Saga Investment Services, said:

“Our survey demonstrates how important it is for people to take the time to think about their savings and investments as early as possible to give them time to put a little more away if they think they are not going to have as much as they need.”


Retirement goals and planning

Making sure that you are able to live the life you want to in retirement requires planning and thoroughly evaluating your current and likely future position.

To get the process started, you need to answer the following questions:

  • Have you identified your retirement goals?
  • Do you simply want to be able to live comfortably or do you have more specific ideas in mind?
  • How much money will you need to achieve your goals?
  • Are you saving into a pension?
  • Do you have savings and other assets such as property?

 

How much is enough?

So, when you retire how much income do you need? Well, that is the million-dollar question. According the Office for National Statistics (ONS) the average retired household spends £21,770 per annum.

If you work the full 35 years, paying National Insurance contributions throughout your working life, you can expect a state pension of approximately £8,000 a year. If you are targeting a total income of £21,770 after tax, then the additional income required from your own personal arrangements would drop to £13,770.

However, building a pension fund large enough to sustain this level of income throughout your lifetime could mean accumulating a pension pot of at least £475,000 and depending on the benefits you might wish to include for your loved ones, the pension fund may need to be considerably more.

According to a recent BBC* article a man retiring at 67 who is a basic rate tax payer and who requires a gross income of £20,000 each year for 30 years, would have to save approximately £246 per month (net) into his pension from age 25. If he were to delay starting to save until age 35 this rises to over £400 per month and leaving it until age 45 it would more than double to well over £800 per month.

It is therefore critical to plan as early as possible. Delay can be very costly.


We can help

At Omnium Wealth, we use sophisticated cash flow modelling techniques to help our clients pinpoint their personal target pension income and then plan how to achieve this objective.

Give one of our advisers a call today on 01483 205890.

 

 

*Source: bbc.co.uk, January 2017

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