How much do you have to save for retirement? The answer is that it depends on the person. One person may be looking for a pension full of traveling, while the other wants something very more modest.
This entails challenges when it comes to setting up pension policy and is a problem with which the government has to struggle because it is ready to announce the second phase of the pension overview that will focus on adequacy. It is a piece of work that will inform thinking about the state pension and the workplace and the private facility for the coming years.
Setting too high goals can mean that lower earners may have slept in their retirement and run the risk of struggling financially today. It can even turn them off completely. Setting the bar too low risks higher earners who go through life, they think they have done enough and then get an annoying shock.
The Hargreaves Lansdown Savings and Resilience Barometer looked at four important measures of adequacy to see which people can help work out if they save enough.
These include so-called “pounds and pence measures” that try to put an actual figure about what pensioners need to achieve pension-to-agency. Pounds and Pence measures include the Living Pension Benchmark of the Living Wage Foundation that sets an income level to meet the daily basic needs for individual and associated households.
This can be seen as the absolute minimum that someone should save for pension and it sets a target for pension contributions, or as a percentage of the salary (12%) or a minimum cash (£ 2,950 for a full -time employee of the living wage).
Read more: Important questions to ask yourself to plan a comfortable pension
Hargreaves Lansdown also assessed the minimum, moderate and comfortable standard of living of the pension and lifetime savation associations (PLSA) benchmark for single and linked family income.
The investigation looked at so -called relative measures, such as target replacement rates, which retire a level of income based on the profit before retirement. For example, they can say that someone has to save sufficiently to cover two -thirds of their salary for retirement.
A specially designed current pension expenditure expenditure was also used. This determines an income level in retirement using the current retired expenses by income group, relationship status and term of office.
Analysis of these measures that are found with the help of pounds and pence measures may not reflect the current standard of living of higher earners, so she could appease in a false sense of security. They can also give the impression that lower earners are falling behind, while in reality they do not have to hit higher goals to maintain their current lifestyle.
