Are you saving enough for retirement?

‘Are you saving enough for retirement?’ is a sponsored post written in collaboration with PensionBee. All views are my own.

When I was younger, retirement seemed so far away it seemed barely worthy of my concern. I knew that people got a state pension from the government so I assumed it was taken care of. Other than that, I didn’t give it a thought.

As time went on, I was fortunate to work in local government and the civil service for much of my working life, which have traditionally always had generous pension schemes. Even though at the time I didn’t need to opt in to a company pension scheme, it always seemed a good idea. Guided by older, wiser colleagues, I dutifully completed my pension applications and didn’t notice the monthly reduction in salary.

Now that I am in my fifties and I can see retirement peeking at me from ‘over the hill’ (where I’m heading, you might be thinking), I am happy that I managed to accrue a large enough pension pot to keep the wolf from the door.

However, I certainly could have planned better. Although I am not worried about a retirement living on rice and beans, neither will I be travelling the world on a luxury cruise liner in my dotage. My vague dreams of an early retirement with a second home somewhere exotic are a long way from reality.

Many people are not saving enough

However, many people are not in as good a position as I am. Online pension provider PensionBee recently examined the data of over 15,000 consumers* and found that, generally speaking, they’re under-saving for retirement.

The PensionBee research showed that savers in their forties were the best prepared for retirement, with an average savings pot forecast to be worth £87,203 by age 65. Worryingly, savers in my age group – 50 plus – are predicted to have one of the lowest pension pots, worth £78,294 by age 65.

Under 30’s were saving even less. Those surveyed by PensionBee are expected to have an average pension of just £69,574 on retirement. However, their incomes, and therefore their pension contributions, are likely to increase as they get older. Starting early is the best idea!

Expected pension pot size at retirement

The state pension will not provide you with enough money to live on by itself. The most you will be eligible to receive is £8,767.20 annually – just £168.60 a week.

How much is ‘enough’?

Recent research by Which? revealed that the average retired couple spends around £27,000 a year. This covers all basic expenditure with a few treats like the odd holiday thrown in. Which? estimates that for a comfortable lifestyle in retirement, and to provide this figure of £27,000 per year, a couple needs around £215,500 in their pension pot.

This means that the average saver in the PensionBee research needs to increase their retirement savings by a substantial amount! PensionBee believes that most people could make a big difference to their financial health in their later years by saving just £100 a month extra.

Incidentally, if you want that luxury cruise line lifestyle you will need a pot of £502,775, giving you an annual draw down income of £42,000.

The benefits of saving into a pension scheme

As well as the obvious benefits of having enough income for a comfortable lifestyle, there are other advantages to be gained from regular contributions towards your pension.

In the UK you get tax relief on your pension savings – which means money that you would otherwise have paid to the government gets added to your pension pot. This is effectively free money!

These days you get auto-enrolled onto workplace pension schemes. You can choose to opt out, but unless you have unmanageable levels of debt, you would be wise not to. In addition to what you put into a workplace pension scheme, it is topped up by your employer. Even if you won’t feel the benefits until you retire, this is like getting a pay rise. Why would you turn that down?

The Money Advice Service explains the process of auto-enrolment here and how tax relief works here.

How much are you saving?

What can you do to make sure you are saving enough for retirement?

The first positive step is to use a pension calculator to work out your current forecast. PensionBee has one you can use here. It includes your state pension in with the mix, but you can check that separately on the government website as well to make sure you have paid enough National Insurance contributions.

If you pay into a workplace pension scheme you will receive an annual statement with a current forecast of the projected income for retirement.

How much difference will an extra £100 a month make?

Based on their research, PensionBee calculated the difference to each age group paying in just an extra £100 a month would make.

Savers across all age groups would be considerably better off. Those in their forties could be looking at an average pot of £118,640, and the under thirty age range would almost double their expected pots to £124,287. Even those aged fifty and upwards could add around £15,000, bringing their pots to £94,256. The table below illustrates this.

Expected pension pot size at retirement, with additional contributions

You can play around with the PensionBee calculator and adjust the monthly extra contributions to view the difference they will make to your final pension pot.

How can I find the extra money?

Now that you have worked out how much you are likely to receive in retirement, how can you find the extra money to top it up if you need to? Here are some ideas.

Save money on your groceries by planning your meals and writing a shopping list.

Reduce your energy bills with some simple measures, outlined in this post.

Increase your income with some ideas from my side hustle category. Maybe you can become an eBay seller, make money doing online surveys, host foreign language students, sell your creative services on Fiverr or create your own products on Amazon’s Merch platform?

I have loads more ideas to help you save £100 plus every month on my posts Fifty Shades of Frugal, Fifty Ways to Save Money Now and Fifty More Ways to Save Money.

If you want to go even more hard core, here are 25 Extreme Ways to Save Money.

A bit of frugality and creativity now could mean that you can ensure you are saving enough for retirement and can relax when you get there. How are your retirement savings going? Do you think you will be on that cruise?

*PensionBee compared 13,973 individuals with PensionBee pensions, who are broadly distributed like the general UK population between England, Northern Ireland, Scotland and Wales, albeit with a slightly higher concentration in London and the South East. The sample includes 4,050 women, representing 29% of the sample, and 9,923 men, representing the remaining 71% of the sample. The sample represents an age group of 18-76 years with an average age of 38.