How much do you need to retire comfortably?
Royal London has conducted research with pensioner clients and found that £260,000 is the optimum target pension fund to be able to retire comfortably. They worked on figures based upon a person earning UK average income of £27,000 and then with lower travel costs, no mortgage costs etc needing income in retirement of £17,500 pa inflation linked. Assuming you have a full state pension, currently £8,545 pa. and a £260,000 to provide private income of £9,000pa. also inflation linked.
It is why, perhaps, you keep seeing advertisements online from some companies suggesting they can show you how to retire with £250,000.
We decided to take this one stage further, as the £260,000 is the suggested minimum today, what will you need if you are retiring in 10 years, 15 years etc. The table below assumes a 5% income from pension fund and that you start taking private pension income when you reach state pension age.
What might you need when you retire?
Years to Retirement |
Year |
Projected State Pension |
Savings Needed |
5%pa Income from Savings |
Total Income |
0 |
2018 |
£8,545.68 |
£260,000.00 |
£13,000.00 |
£21,545.68 |
1 |
2019 |
£8,759.32 |
£266,500.00 |
£13,325.00 |
£22,084.32 |
2 |
2020 |
£8,978.31 |
£273,162.50 |
£13,658.13 |
£22,636.43 |
3 |
2021 |
£9,202.76 |
£279,991.56 |
£13,999.58 |
£23,202.34 |
4 |
2022 |
£9,432.83 |
£286,991.35 |
£14,349.57 |
£23,782.40 |
5 |
2023 |
£9,668.65 |
£294,166.14 |
£14,708.31 |
£24,376.96 |
6 |
2024 |
£9,910.37 |
£301,520.29 |
£15,076.01 |
£24,986.38 |
7 |
2025 |
£10,158.13 |
£309,058.30 |
£15,452.91 |
£25,611.04 |
8 |
2026 |
£10,412.08 |
£316,784.75 |
£15,839.24 |
£26,251.32 |
9 |
2027 |
£10,672.38 |
£324,704.37 |
£16,235.22 |
£26,907.60 |
10 |
2028 |
£10,939.19 |
£332,821.98 |
£16,641.10 |
£27,580.29 |
11 |
2029 |
£11,212.67 |
£341,142.53 |
£17,057.13 |
£28,269.80 |
12 |
2030 |
£11,492.99 |
£349,671.09 |
£17,483.55 |
£28,976.54 |
13 |
2031 |
£11,780.31 |
£358,412.87 |
£17,920.64 |
£29,700.96 |
14 |
2032 |
£12,074.82 |
£367,373.19 |
£18,368.66 |
£30,443.48 |
15 |
2033 |
£12,376.69 |
£376,557.52 |
£18,827.88 |
£31,204.57 |
16 |
2034 |
£12,686.11 |
£385,971.46 |
£19,298.57 |
£31,984.68 |
17 |
2035 |
£13,003.26 |
£395,620.75 |
£19,781.04 |
£32,784.30 |
18 |
2036 |
£13,328.34 |
£405,511.27 |
£20,275.56 |
£33,603.91 |
19 |
2037 |
£13,661.55 |
£415,649.05 |
£20,782.45 |
£34,444.01 |
20 |
2038 |
£14,003.09 |
£426,040.27 |
£21,302.01 |
£35,305.11 |
21 |
2039 |
£14,353.17 |
£436,691.28 |
£21,834.56 |
£36,187.73 |
22 |
2040 |
£14,712.00 |
£447,608.56 |
£22,380.43 |
£37,092.43 |
23 |
2041 |
£15,079.80 |
£458,798.78 |
£22,939.94 |
£38,019.74 |
24 |
2042 |
£15,456.79 |
£470,268.75 |
£23,513.44 |
£38,970.23 |
25 |
2043 |
£15,843.21 |
£482,025.47 |
£24,101.27 |
£39,944.49 |
26 |
2044 |
£16,239.29 |
£494,076.10 |
£24,703.81 |
£40,943.10 |
27 |
2045 |
£16,645.28 |
£506,428.00 |
£25,321.40 |
£41,966.68 |
28 |
2046 |
£17,061.41 |
£519,088.70 |
£25,954.44 |
£43,015.84 |
29 |
2047 |
£17,487.94 |
£532,065.92 |
£26,603.30 |
£44,091.24 |
30 |
2048 |
£17,925.14 |
£545,367.57 |
£27,268.38 |
£45,193.52 |
Comment
Alongside your home, your pension is probably the biggest investment you will ever make. The reality is that if you paying monthly £400, £700, £1,000 in mortgage payments yet you are only saving £50, £100, £200pm into a pension, then you will likely undershoot your pension. Do try and match what you pay in mortgage payments or rents into a pension.
You may wish to try out some of our calculators including pension target and shortfall calculators.