A new survey has shed light on young people’s path to a comfortable retirement. If you are currently in your 20s and having thoughts about retirement planning in Cheshire, you may need a pension pot estimated at around £3.1 million.
The term ‘comfortable retirement’ is, of course, highly subjective. The figure here was calculated using the Pensions and Life Saving Association’s interpretation, taking in a 25-year period after the age of 65. To achieve it, a 25-year-old today would have to save approximately £1,600 every month, working on the basis that their contributions rise by 2% a year and that their pension pot increases by an average of 5% per annum. An inflation rate of 2% is also factored in.
The total amount £3.1 million is more than double the existing estimate of £1.4 million needed to guarantee a comfortable retirement. For 25-year-olds living in a two-person household, the amount needed for a comfortable retirement rises to £4.3 million. Even people aspiring to a more modest retirement would require £2.2 million for an individual, and £3.1 million for a two-person household.
For recent graduates already in debt and facing high rents, this might feel like a daunting future. It is a reminder of how inflation can erode the value of savings over time. To help their kids on this journey, the survey says that an increasing number of parents are helping out financially, with ‘top up’ gifts or junior self-invested personal pensions (SIPPS).
