“ When it comes to retiring, it is crucial to work out how much money a person will need in retirement to meet day-to-day living expenses such as household bills as well as discretionary expenditures including holidays and hobbies.”
JONATHAN WATTS-LAY, DIRECTOR, WEALTH AT WORK
HOW CAN WE BUILD FINANCIAL RESILIENCE ON AN INDIVIDUAL LEVEL? Pensions savings is something that young employees and graduates often neglect to prioritise when they are starting their first job. Yet employee and employer contributions towards pensions in the early years of your career can mean planning for retirement is much more affordable than starting to save in your forties or fifties. “Planning how to pay for retirement is one of the
biggest financial decisions people make. It is important individuals understand all the options available, make informed decisions and avoid making expensive mistakes with their hard-earned savings,” says Jonathan Watts- Lay, Director, WEALTH at work, a leading financial wellbeing, retirement and workplace savings specialist. He suggests that employees of all ages start to think
about how they can start saving as soon as they start work, but as your career progresses you should be taking regular reviews to ensure your planning is on track.
1. WORK OUT COSTS IN RETIREMENT “When it comes to retiring, it is crucial to work out how much money a person will need in retirement to meet day-to-day living expenses such as household bills as well as discretionary expenditures including holidays and hobbies,” says Watts-Lay. According to the Pensions UK, estimated annual
spending in retirement for a single person will be about £13,400 a year if they have a minimum standard of living (this would cover all a retiree’s needs plus enough for some leisure activities such as a week’s holiday in the UK and eating out occasionally); £31,700 a year for a moderate standard of living (one foreign holiday a year and more frequent eating out); and £43,900 a year for a comfortable standard of living (this would cover all a retiree’s needs plus two foreign holidays a year and some luxuries such as regular beauty treatments). For couples, it’s £21,600, £43,900 and £60,600, respectively.
2. TRACK DOWN ALL PENSIONS At least 3.3 million pension pots are considered to be ‘lost’ or forgotten, with each pot being worth an average of £9,500. Whilst auto-enrolment has successfully increased pension participation, it has also led to people accumulating multiple small pension pots as they move between jobs. In fact, there are now 13 million of these small pots, worth £1,000 or less, with the number increasing by around one million a year. This is making managing retirement savings more complex.
3. CALCULATE ALL SOURCES OF RETIREMENT INCOME Many people assume their pension will be their only source of income in retirement but that may not be the case. Other assets, such as ISAs, personal savings accounts and other investments can all contribute to financial security later in life.
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