A new report has suggested that people approaching retirement need to plan for an annual income of at least £15,000 a year, in order to enjoy an acceptable standard of living.
Research conducted by the National Employment Savings Trust (Nest), has found that the wellbeing of retirees is far higher when income reaches the afore-mentioned amount. Indeed, whilst 43% of those receiving around the £15,000 mark each year said they felt comfortable in terms of money, only 24% of those earning below the threshold said they considered themselves able to make financial ends meet.
However, with many workers currently struggling with debt management in the face of increased living costs, there are concerns that reaching the target of £15,000 will be untenable for some. When the state pension begins in April 2016, it is predicted that it will provide between £7,000 and £8,000 a year, meaning that people will have to find ways of saving now, in order to top up their eventual pension pot. As such, Nest have suggested a variety of ways in which workers can make sure they will be supported when they decide to retire from work.
According to their research, a 30-year-old worker on an average wage could make significant savings contributions by changing certain spending and lifestyle habits. For example, avoiding the temptation of a take-away meal can save £12 a week, whilst choosing a packed lunch for work or switching mobile phone contract could boost a retirement fund by up to £63,000 and £16,000 respectively.
However, some experts are opposed to this ‘one-price fits all’ strategy. Hargreaves Lansdown’s pension expert, Tom McPhail, told the BBC: “The lower someone’s pre-retirement earnings are, the higher proportion of those earnings their pension will need to be in retirement.” In other words, finances post-retirement should be a reflection of usual earnings and not a regulated, even and fixed amount.