Both men and women are increasingly staying at work beyond the state pension age, official figures show – but how much do you need for a comfortable retirement?
Data published by the Department for Work and Pensions (DWP) reveals the average retirement age has risen to 65.1 for men and 63.6 for women.
That’s a rise of almost two years for men and nearly three years for women over two decades.
The state pension age for men is currently 65. For women, it’s 63, increasing to 65 in November 2018.
Some 10% of over-65s are currently in employment, according to the research.
Which? looks at how much money you’ll need to save for your retirement.
Find out more: state pension age calculator – when will you be eligible for the state pension?
How much money will you need to retire?
Earlier this year, we asked thousands of retired Which? members to see where their money is being spent.
We discovered that households spend just under £2,200 a month, or around £26,000 a year. This covered all the basic areas of expenditure and some luxuries, such as European holidays, hobbies and eating out. Aiming for this level of income will provide a good platform for your retirement.
Our study suggests you’d need £39,000 a year if you include luxuries such as long-haul trips and a new car every five years.
The graphic below reveals the average annual spending for the retired couples who take part in our survey.
Calculate your retirement income
Once you reach state retirement age, the government will provide a chunk of your post-retirement money in the form of the state pension.
For those who qualify on or after 6 April 2016, the starting point for calculating what you get is £159.55 per week. This is known as the ‘full rate’ – but you may get more or less than this. The amount of National Insurance Contributions (NICs) you’ve made and the date you reach state pension age will influence how much you receive.
The full rate of the state pension increases every year based on the triple lock, which guarantees that the basic state pension rises each year by either the rate of inflation the increase in average earnings, or 2.5% – whichever is highest.
Our video guide can help you calculate how much state pension you’ll get.
Making regular contributions to a private pension is one of the most efficient methods to save for your retirement. The government will add to your pension pot in the form of tax relief, while many employers will make additional contributions to workplace pensions.
The 2015 pension freedoms increased your options for how to create an income from your pension pot – most people will be able to choose between an annuity, income drawdown or taking the cash as a lump sum.
The calculator below estimates the size your pot will be when you reach retirement age, and what income you could expect to get if you opt for an annuity or income draw-down.