New research from NEST (National Employment Savings Trust), the government-backed organisation which oversees automatic pension enrolment, puts the threshold for a comfortable retirement at around £15,000 per year.
Improved quality of life
The NEST 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 £15,000-£20,000 a year compared to those with less.
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 £15,000-£20,000 a year and levelling off at around £40,000 a year. The survey also highlighted that retirees’ satisfaction with life increases by an average of 7% per extra £5,000 annual household income they have.
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.
Tips to fuel your pension pot
The report also highlighted how a 30-year old could build up extra pension savings by making a few changes to their spending habits between now and retirement at age 68.
- Cut out one coffee shop coffee – £2.80 each week or £11,800 in total towards your pension fund
- One less pint – £3.50 or £14,800
- Switch your mobile phone tariff – £3.80 or £16,100
- Work out at home instead of a gym membership – £8.50 or £36,100
- Bring a packed lunch to work everyday – £15 or £63,700.
People have time to save
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 the 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.’