Jun 20

So you think £100,000 is enough? Friends you need a business and you will find one here.

You probably wouldn’t have trouble spending £100,000.

But what looks like a huge sum is not so impressive when you consider what you might need for a comfortable retirement. Today, a pension pot of £100,000 saved throughout a working life would buy a 65-year-old non-smoker an annuity, or annual income, of £6,000 to £7,000 a year (or £580 a month), and that’s before tax.

And don’t forget inflation: as the cost of living rises, a fixed monthly sum will buy less and less. To avoid this, you can take out an annuity that allows your retirement income to rise in line with inflation. However, at least initially, you’ll have to accept a lower monthly pension for this safeguard.

Of course, most people will receive a state pension. In this tax year, the full basic rate – dependent on your having worked for many years – is £84.25 per week. Those on low incomes can also get pension credits. Knowing how much you need to live on in retirement – and therefore need to save – is now more important than ever. In the past, many workers belonged to final salary pension schemes, which guaranteed to pay out a percentage of their final wage. But many companies are now closing such schemes to new entrants and demanding higher contributions from all staff.

The £100,000 example cited above pays an income that, for many, won’t be enough to support their current standard of living. Yet it’s much greater than the average private pension savings pot amassed by Britons: industry estimates of this vary from £25,000 to £32,000.



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