Savers must set aside a quarter of income for good retirement

31 October 2019

Anyone hoping for more than a basic level of income and lifestyle in retirement needs to be putting aside around a quarter of their salary, according to new analysis


To reach what is being called a “full moderate income” in later life, individuals should save £799 a month on average over their entire working career. This represents around a quarter of earnings for someone on an average full time salary. 

For a couple this would be £753 per month split between two individuals.

The figures have been calculated by the Institute of Actuaries (IoA) to warn those who are only contributing the auto-enrolment minimum to their workplace pensions.

This was increased to 8%, with at least 3% paid by the employer, in April, but experts say it is far from enough.

Mark Williams, chair of the IFoA’s Pensions Board, says: “We appreciate that these savings goals are high, and to many, they will appear daunting. 

“Our role to ‘do the maths’ and we believe that it is in the public interest to demonstrate the potential scale of under-saving, and the impact it could have on people’s retirement prospects.”

A “moderate” lifestyle requires around £20,200 a year for singles and £29,100 for couples, according to analysis by the Pensions and Lifetime Savings Association, which the IoA has used for its figures.

For that retirees would have around £46 a week to spend on food shopping, could splash out on a two-week break in Europe every year, dine at fancy restaurants several times a month, and take up more adventurous past times that cost a bit more.

By comparison, the state pension, at the moment £8,767 per year, and current automatic enrolment contributions of around £86 per month from the start of their working life will provide only a minimum level of income in retirement, according to the IoA.

It will give an income of around £10,200 a year, for a single person, and £15,700 for a couple, and mean having around £38 a week to spend on food shopping, maybe a yearly holiday in Britain, going for dinner in a restaurant once a month, and a couple of cheaper hobbies every week. 

To close the gap between this minimum and moderate income level in retirement, the IoA has said employers and the government will need to act.

Williams says: "We urge the government to assess whether the current balance between the levels of employee and employer contribution is appropriate. Individuals alone should not be burdened with the responsibility of closing what could become a significant savings gap unless there is further policy reform.

“Modern workplace pensions require people to take responsibility for their own retirement saving and planning, but in our survey, almost a third of respondents said they did not know what constitutes a ‘good pension pot’.

“There is a shared responsibility between individuals, employers, the pensions industry and the government to give individuals the best possible chance of having enough money in retirement.”



Articles such as these certainly discourage the average person. I do not know anyone who saves 25% of their income, but there again I don't know any company directors, financiers or bureaucrats.

In reply to by Brian Bungay (not verified)

indeed, it’s hardly possible…

indeed, it’s hardly possible to find a one able to put aside a quarter of the income... and the bills..... and essentials.... and insurance and......

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