Exclusive pension data about the amount you should save before retiring has been revealed – and some age cohorts are more concerned than others. Experts have looked at what amount each age group needs to put away to be able to enjoy a comfortable retirement, with Generation X being the « most concerned » about reaching pension age.
Financial institution MoneyPlus revealed that 74% of 45 – 60-year-olds (Generation X) have said they are worried about their financial situation in retirement, with nearly a third admitting they are relying on inheritance to support themselves later in life. Unsurprisingly, Generation X are the most concerned about their retirement finances, as these concerns are far more immediate and often compounded by financial pressure in their daily lives. Many people in Gen X have worked for multiple employers throughout their careers, meaning there could be forgotten pensions sitting untouched.
MoneyPlus explained that you can use the government’s free Pension Tracing Service to find and consolidate pensions and added that Gen X’s focus « should be clearing debts and maximising contributions. »
With the average retirement age in the UK currently at 66, Anel Andrew at MoneyPlus reveals how much each age bracket should be saving each month, looking at ages 18 – 28, 29 – 44 and 45 – 60.
The UK retirement income benchmarks are also set out by the Pensions and Lifetime Savings Association (PLSA)—they advise a minimum of £14,400 per year.
But advised a moderate saving of £31,300 per year – and to be ‘comfortable’ in retirement, a total of £43,100 per year should be saved for pension age.
MoneyPlus said: “Minimum will cover the essentials with a few treats, moderate gives you more flexibility, where you can afford things like occasional holidays abroad, and comfortable affords more luxuries, including things like regular holidays and new cars every few years.”
The 18 – 28 age bracket, known as Generation Z, are the ones ‘who are the least dependent on inheritance’ with just under 23% ‘relying on inheritance for their retirement’ according to MoneyPlus data.
However, although Gen Z has the longest wait until retirement, they are still just as concerned about their future, with nearly 62% saying they’re worried about their financial situation when they retire.
MoneyPlus said that a useful rule of thumb is to ‘save half of your age as a percentage of your salary’.
For example, if you’re 20, aim for 10%, as even the smallest contributions add up over the next 40 years of work, so it’s always best to start as soon as you can.
For a ‘moderate’ retirement lifestyle, you should have already saved 0.5 – 1 x of your salary, so based on the UK average salary of £37,500, you’d be aiming for a monthly saving target of 8 – 12% of that gross salary (including contributions from employer).
Millenials, (also known as Generation Y), aged 29 – 44, are in the prime years for earning, but are also in the peak expense years, from mortgages to childcare, and the rising cost of living is competing with how much they can save.
Pension contributions can be tempting to skip on tricky months, so it’s a good idea to automate them, and if you get a pay rise, increase your pension contributions before you get too used to the additional money.
For a ‘moderate’ retirement lifestyle, a ‘saved so far’ target connected to your age would be mid-30s: 1 – 2 x your salary, early 40s, 3 – 4 x your salary.
Based on the UK average salary of £37,500 you’d be aiming for £105,000 – £140,000 by age 40.
The monthly savings target is 15% of your gross salary, including contributions from the employer.
For a ‘moderate’ retirement lifestyle the ‘saved so far’ target would be 5 – 7 x your annual salary by your mid 50s, again based on the UK average salary of £37,500 this would amount to £200,000 – £280,000.
The monthly saving target would be £1,000 – £1,200, including contributions from the employer, if starting to save at the age of 50.
