How much income do you need for a comfortable retirement? New research has put a post-pandemic price on the answer.
When the Chancellor announces tax rises that are One traditional way to answer the question of how much income you will need in retirement is to fix the amount as a percentage of pay. For example, when final salary pension schemes were more common, their target was often around two thirds of earnings. While this approach produces an easy to calculate number, it is arbitrary. For low earners it may produce too low a number, while at the opposite end of the scale the result may be too high.
An alternative is to focus on retirement living standards, an option that has been supported in the UK by the Pension and Lifetime Savings Association (PLSA) and is mirrored by approaches used in other countries. The PLSA sets three levels of post-pandemic retirement – see chart 1.
Where would you want to be on those scales? It’s likely that most of us would veer towards ‘Comfortable’.
Now for the annual cost in terms of after-tax income – see chart 2.
If the numbers surprise you, then it is probably time to start checking that your retirement funding will meet the standard of living that you want.
The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.