According to a recent survey by MetLife only 26% of over-50s think they are heading for retirement in good financial shape, while 64% admit they either do not know or do not believe they will have enough money to fund a comfortable retirement including 32% with no savings.
This obviously shows that there are many people who need to start thinking now about retirement planning. You probably need to put aside more money than you think.
How much income does a £100,000 pension fund buy you if you retire aged 65?*
- If you are a man – £6,786 per year
- If you are a woman – £6,456 per year
* These figures are based on the best available quotations obtained on 4th February 2011. Quotations based on a healthy single life, level annuity, with no guaranteed period, and no spouse’s pension. These figures are taxable.
Therefore, if you want to achieve an income of £25,000 before tax you will need a retirement pension fund of £368,405 if you are a man, and £387,236 if you are a woman. What’s more, these figures are based on pension incomes that will never rise, which means that inflation would eat into your retirement income over time. Expect to reduce your initial pension income by around a third if you want your retirement income to rise with retail prices, or inflation (which means you probably need to adjust your required pension retirement fund upwards by a third too).
Of course, you should have the state pension to fall back on (currently £5,077 per year), but this is being paid later and later (currently heading towards 68). The only way to be certain of providing a decent retirement income for yourself is to start retirement planning now.
A good financial plan will help you to make sense of all your assets (including your pension plans), and work out how your current and future lifestyle will impact on your retirement plans.