How much would you need to save to draw an annual pension of £20K at 65 years old
Analysis has suggested that for a person to retire at 65 – with a life expectancy of 100 – they would need a pension fund of £447,000, if they wanted to be able to withdraw £20,000 per year from it.
While it’s questionable whether £20,000 pa is going to be enough there is a real issue here for future pensioners.
With the probability of people living longer a sustainable income in retirement is very important
“Younger generations in particular will need to consider the possibility their pension savings will need to last 35 years or more or they will need to retire at a later ageTom Selby, senior analyst at AJ Bel”
Around 6,000 people reached a 100th birthday telegram from Queen Elizabeth, while by 2050, it’s estimated that in 2050, this number will be more like 56,000.
“However, if they delay retirement five years to age 70 the size of pension fund needed to reach age 100 would reduce to £407,000.”
Starting age of 25
“The best way to ensure a comfortable retirement is to start saving early and often,” Mr Selby said.
“To save the £447,000 required for an average salary in retirement from age 65 to 100, a 25-year-old would need to save £235 a month.”
Assuming a five percent investment growth per year after charges, this would mean the fund value at age 65 would be £447,110, AJ Bell said.
Starting age of 35
What about if pension contributions from the age of 25 are not high on the agenda, but by one’s 35th birthday, they are?
The figures show that the monthly personal contribution required is almost double at £428 – for a fund value to reach £447,864 by the age of 6
Starting age of 45
Fast forward 10 years, and the amount jumps to £859 for a fund value of £447,358 when one reaches their 65th birthday.
If the figures seem high there are other factors covered in the article that might improve the numbers but with the pressure of low interest rates, people living longer I do have do question the overall sustainability of Pensions and Annuities as we know it.
Pensions are a a very real issue and if nothing else having a contingency plan is a good strategic move.
is one of the reasons I have added STORH to my portfolio