The threshold for a comfortable retirement is around £15k a year, the findings of a new report published by NEST shows.
The report, which looks at a number of factors, including pensioners’ ability to afford everyday household bills as well as their sense of satisfaction with life, found a significant shift in quality of life among pensioners living on a household income of £15-£20k a year compared to those with less.
Based on these findings, NEST calculates that the average worker likely to be automatically enrolled in the scheme at the minimum levels should be able to save up enough over their working life to get most of the way to that threshold. A worker who starts saving at 22 should be able to double the amount of income they receive from a flat rate State Pension, by the time they reach retirement age, even if they only put in the minimum level of contributions.
However, the research found that any additional income above the State Pension has a positive impact on quality of life, with wellbeing rising significantly at around £15-£20k a year and levelling off at around £40k a year.
Commenting on the findings, Tim Jones CEO of NEST said:
‘Retirement is now more likely to be a gradual shift than a one-time ‘cliff edge’ event. Many people will have more time to save up and the latest reforms to pensions mean there’s more choice than ever for accessing retirement savings during later life. Our findings underline the message that tomorrow’s worth saving for. However people access their retirement savings in future, our research suggests most people will want around £15k a year to live comfortably.
‘A workplace pension is just one tool in the savings box, but, along with a triple locked flat rate state pension, our report shows it can provide a vital foundation to build on. Being able to afford a few extras can make a significant difference in later life.
‘Saving for later life is something we all know we should be doing but it can easily slip to the bottom of the priority list. With automatic enrolment most workers will be given a helping hand to get started and, with employers topping up workers’ pots, it will go a long way to improving quality of life in retirement.’
The report finds:
Pensioners’ overall satisfaction with life increases by an average of 7 per cent per extra £5,000 annual household income they havAcross the vast majority of measures surveyed, pensioners’ quality of life and sense of wellbeing jumps significantly when they reach an annual household income of at least £15,000-£20,000
43 per cent of pensioners living on a household income of £15,000-£20,000 say they are financially comfortable, compared to just 24 per cent of those living on less than £15,000
A third of people living on less than £15,000 find it difficult to afford their household energy bills and a quarter find it difficult to afford groceries, which drops to just 15 per cent and 9 per cent respectively for pensioners with a household income of £15,000-£20,000
Women are more likely than men to be living under the threshold, with 24 per cent of women living on £10,000 or less, compared to just 10 per cent of men. Two fifths (41 per cent) of women feel their annual household income is not enough to give them the retirement they’d hoped for
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