‘People put their heads in the sand’ with retirement says expert
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Many put cash away in their pension blindly and have little notion of whether they are building towards the retirement of their dreams or aren’t putting in enough.
Fortunately, the Pensions and Lifetime Savings Association (PLSA) has built a guide to help people build a picture of what their retirement is likely to look like.
The guide breaks down retirement income into three levels: minimum, moderate and comfortable.
The moderate retirement income is said to provide “more financial security and flexibility” and the guide explains what is needed to achieve this.
Although around half of retirees will enjoy an income somewhere between minimum and moderate, financial security and flexibility in retirement is within the grasp of many.
For the moderate income described, an individual will need an income upwards of £20,000 a year and a combined income around £30,000 between a couple should suffice.
Around half of employees are projected to have an income between minimum and moderate (Image: Getty)
Essentially, this level of income will give people the opportunity to do lots of the things they really want to do in retirement, the guide says.
As for what this means concretely, it will allow people the financial freedom to enjoy two weeks of European holidaying every year and a long weekend somewhere in the UK.
Besides time away, a moderate retirement income will be able to fund a £750 yearly budget for clothing, a £46 weekly shop, the purchase of a three-year-old car every 10 years and will give breathing space for generosity when it comes to birthday gifts.
It means a £30 birthday present for relatives will be on the cards.
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The PLSA guide said this should be taken as a “rule of thumb for retirement planning”.
The state pension is a factor of retirement income that shouldn’t be forgotten as it forms the first building block of most people’s retirement income and ultimately, the majority of most people’s retirement income.
People receiving the new full state pension will be entitled to an income of £179.60 a week, which works out to around £9,340 a year, which would cover a healthy portion of a moderate retirement income.
For those lucky enough to be able to enjoy an individual income of at least £30,000 or a couple’s income upwards of £45,000, they will be receiving a comfortable income.
Naturally, they will be in a position to enjoy many of life’s luxuries, such as more foreign travel, newer cars and more disposable income in general.
They will be able to look forward to three weeks of European holidaying every year, a two-year-old car replaced every five years, a budget up to £1,500 for new clothing, a £56 weekly shop and increased generosity when it comes to gifts, where there will be room for a £50 birthday present.
About one in six employees are projected to enjoy this income level, the PLSA said.
However, on the other end of the spectrum, those on a minimum income will have to live far more frugally.
What is the state pension? (Image: Express)
A week long holiday and a long weekend in the UK will be all the travel that’s affordable, no new car, just a £38 weekly shop and a clothing budget under £500.
Moreover, they will only be able to give gifts of £10 for special occasions.
However, about a quarter of employees are unlikely to achieve even this level of retirement income.