With the cost of living spiralling, many people are worried about the impact on their future finances – with some even admitting they may not be able to afford to retire when the time comes.
While people are clocking in their hours each day, many are doing so to ensure that, eventually, they won’t have to.
By working, you’ll be paying into your state pension and, eventually, should be able to retire to live a more leisurely life – however, millennials and Gen Z are failing to prepare for that time.
What is the retirement age in the UK and what are some ways to save for your future?
What’s the retirement age?
You can, fortune permitting, retire at any age.
However, when we talk about the retirement age in the UK, we often mean the State Pension age.
This is the age in which you’ll start receiving money from your pension and have the possibility of living off of that and not working for a paycheque each month.
The State Pension age is currently 66 for anyone born before 1960.
For those born on or after April 1960, the State Pension age is 67 and, for those born on or after April 1977, the state pension age is 68.
The age is under review and may change in the future.
How much money should I save for retirement?
There is no universal figure that would apply to everyone, as people have different standards of living.
As a guidance, the Pensions and Lifetime Savings Association (PLSA) categorises the retirement into three different living standards:
- Minimum – geared towards paying for essentials with all your needs covered.
- Moderate – gives financial security and some flexibility.
- Comfortable – provides more financial freedom and some luxuries.
Using these as a base, the PLSA alongside Loughborough University, calculated some estimated figures that could suit each of these profiles.
The research suggests that retired couples living outside London are spending on average around £30,600 a year in 2021 (excluding housing costs).
That figure represents a staggering £1,500 more than before the start of the coronavirus pandemic.
They conclude this amount should be enough to accommodate a ‘Moderate’ retirement lifestyle.
This is because, as well as paying for all your everyday needs, it should cover some extras, such as two week-long holidays a year in the UK and Europe. It also covers an average of £100 each month on eating out.
To achieve a ‘Comfortable’ lifestyle, including 3 weeks’ holiday a year and running two separate cars, a couple would need a figure closer to £50,000 a year, the PLSA has suggested.
How much should you save towards your retirement?
There’s a general rule of thumb that often gets cited by experts when discussing pension contributions and savings.
This well-known tip suggests taking your age, halving it, and that’s the percentage of your pay you should be contributing to your pension or retirement fund.
So, if you start saving at the age of 30, you should try and put 15% of your pay away each month.
Nowadays, there are apps like MoneyBox that allow you to more easily save towards a personal pensions pot, right from your smartphone.