How much do you need to save for your pension?

When trying to work out how much you need to save for your pension, firstly work out what your pension or investment forecast is, then you need to answer the following questions we have outlined below before you can estimate whether or not this will be sufficient.

What age do you want to retire? 

The earlier you retire the more money you will need. We do not know when we will die so we have to make an educated guess at this and presume we need 20-25 years worth of pension, based on a retiring age of 65.

Will you retire fully or keep a part-time role?

Not everyone wants to retire at all, and may well work until they can no longer or reduce their hours. If you expect you will have an income factor this into your pension planning.

How much will you need for outgoings?

‍There are a number of ways you can do this as outlined below. The further you are from retirement the less rigour is needed, as you get closer to retirement you will have more detail and therefore be able to have a more accurate figure in mind.

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1. Complete a budget planner of your current expenses- Budget Planner from Moneyhelper or download the one we have created a simple google spreadsheet you can copy and fill in. YOUR RETIREMENT EXPENDITURE TEMPLATE
   To ensure you cover everything, print out your bank statements.
2. Calculate a figure based on your current income - pension calculators suggest you will need a minimum of 50% of your current income. E.g annual income of 40k you will need 20k. This is arbitrary and does not take into account your current circumstances or if you expect to earn more as you mature.
3. Take your current income and take off expenditure you will not need have when you retire and remove savings. Eg. annual income of 40k, 10k is mortgage, and you save 5k. Outgoings equal 25k.
4. Use the PLSA guidelines. They have 3 categories; minimum, moderate and comfortable. Minimum starts at :£14,400 a year for a single person and £22,400 a year for a couple, moderate starts at :£31,300 a year for a single person and £43,100 a year for a couple and comfortable starts at :£43,100 a year for a single person and £59,000 a year for a couple. These are averages around the country and so should be taken as a starting point only.
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