The average UK earner requires a pension pot that is over £300,000 to maintain their current lifestyle in retirement, it has been reported.
According to new analysis by Aegon, people on average earnings need a pension pot of £301,500 to continue their lives through retirement. With this pot, an individual at the age of 65 in good health would be able to buy a guaranteed income for life (annuity) of £808 per month, increasing with inflation.
For those earning £13,000 and £56,000, the equivalent retirement pot is £65,300 and £612,700 respectively, to maintain working age lifestyle.
Aegon pensions director Steven Cameron said: “The auto-enrolment review identified that there are 12 million people under saving… The amount is so high because life expectancies have grown significantly in recent decades and long term interest rates, on which annuities are based are currently very low.
This is in line with the government’s auto-enrolment review published at the end of December 2017, which noted that to maintain a lifestyle into retirement, individuals need to aim for a target percentage of income from their pre-retirement years.
“While automatic enrolment is helping plug the pension gap for employees, many of us face a shortfall which won’t go away on its own. The earlier you take steps to put a bit more aside, the better, and a good New Year’s Resolution would be to ask your employer if they’d be prepared to match any increase you make with an increased employer contribution.
“Previously, many people planned their retirement around when their state pension would start and used their retirement fund at that age to buy a regular income for life. The pension freedoms introduced in 2015 have proved hugely popular and many individuals are dipping into their pensions, or even cashing them in entirely from as early as age 55, long before they reach state pension age. While this is an attractive option for those who can afford it, the more that’s taken earlier, the less is left to maintain lifestyle in later years of retirement.”
