A 30 year old needs to put £824 into a pension a month to retire on a comfortable 75% of income

18th July 2013

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The typical 30-year-old should save £824 per month for retirement according to calculations by an international financial adviser.

Those calculations by deVere admittedly involve an assumption that you will want to have 75% of your current income as a pension and are prepared to set aside a lot of money to get there. This is quite a high target because outgoings when you retire tend to be less, though that burden of contributions may be partly shouldered by your employer’s contribution. The research may help concentrate minds however, not least because the research also shows that the price of retiring costs significantly more for every year you delay the decision.

As deVere says, the average 30 year old British worker should be putting aside £824 a month, if he or she wants to retire at 65 with a level of pension income which is 75% of their income while in work.

It says that waiting just one more year without saving increases that amount to £887 a month.

The calculations are based on the UK’s average salary of £26,500, with an assumption of someone retiring at the default retirement age with a pension income of 75 per cent of their pre-retirement earnings. deVere say this is generally what the pension industry recommends for someone with no current savings, annual inflation of 3 per cent, pre-retirement investment returns of 5 per cent, and post-retirement investment returns of a more conservative 3 per cent.

(Once again the default retirement age is something that is actually becoming a thing of the past. Employers can no longer say that you have to retire unless they can demonstrate that you are no longer capable of doing your job. This may lead to messy disputes. However for the purposes of this research, it probably is a reasonable age to base these calculations.)

deVere Group’s chief executive Nigel Green says: “These figures are particularly alarming as latest official figures reveal that contributions to private pensions have recently hit a 6o year low.  And even those who are paying in are not contributing nearly enough.

“Additionally, it must also be remembered, of course, that if the average 30 year old should be putting aside £824 a month for their retirement, a 40 or 50 year old, for example, under the same conditions, would to need save significantly more than this in order to reach the same outcome.”

“The ideal for most people is to retire at 65 and enjoy an active, financially-secure retirement.  But unless you have the discipline to put money aside whilst you’re working, it is, unfortunately, likely that you’ll need to drastically reconsider your retirement plans when you hit 65.

Green says otherwise people may face working into their 70s.

The deVere Group notes that its calculations are released as new Office for National Statistics’ (ONS) data reveals that the proportion of workers paying into a private pension has slumped to historic lows.  The ONS figures show that only 35 per cent of men and 32 per cent of women under the age of 65 paid into a private pension during 2011/12. The amounts they are paying in and the age they are paying in at, suggest retirement incomes are going to be significantly lower for a large group of people unless they do something about it.

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