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How much do you need to retire in the UK

How much do we need in our pension pot to enjoy our retirement?

By Spencer HawkenPublished 2 years ago 8 min read
How much do you need to retire in the UK
Photo by James Hose Jr on Unsplash

So, I should begin with an apology, unfortunately this article is geared towards people in the United Kingdom. Unfortunately, the rates and variation of other countries are just too big a task for my tiny brain to figure out what it is that you need to retire in other countries.

At the ripe old age of 47 I have been obsessed with finding out what I need to retire for about the last two years. I'm not wishing my life away but I'm very much aware of the fact that my life is drifting away, it was only yesterday (at least in my head) that I left school for the last time in preparation to start my career, now sooner had I begun work some nice chap came round to my place of work and said to me you need to think about your pension. My reply of course was “I'm 16 years old I might not even live to be a pensioner”, and while this is a common thought for the many, it's worth bearing in mind certainly in the UK that the average life span of a male is 83 years old. My grandmother always said to me you're a long time dead, but actually you could be a long time between those final working days and your death, my Grandmother for example I never really knew as someone who worked, she was always either retired or part-retired, but she was one of the very few in my family to actually reach retired, a combination of bad genes and bad habits has bought untimely death to many. While the expectation is that we will now work longer, as someone who grew up in a family that very few managed to reach retirement age you could say I'm obsessed with retiring. But as I said earlier, I'm 47 years old that means I've got 19 years until I retire when I've been working since 1988 and I kid you not that time period has gone by in a blink of an eye, while much has happened, I still think about my youth like its less than 33 years ago.

By eberhard grossgasteiger on Unsplash

Why am I telling you this? well I'm telling you this because if you are 16 years old, it’s never too early to think about saving for retirement, because suddenly it will be there, and you could be forced to work beyond your retirement age if you have not saved enough. I started saving very late and its only because fate put me in a place that earned me a lot of money, that I was able to make up for lost time.

If you try searching for the amount of money that you need to retire in the United Kingdom, you're not going to get a straight answer and it's taken me two years from when I began searching to finally get to the straight answer. I’ve done much research, copious pension calculator calculations and lots of study in interest rate and inflation costs over the last twenty years.

In the UK we are all entitled to what we refer to as a national state pension at the current time this is £137.60 per week however it may be less if you have not worked what the government believe to be the minimum working life, which is around 35 years. As the years go on and inflation rises around 2.5% per year the amount of pension will increase. There's this strange thing going on in the UK at the moment where some people if they've worked more years than potentially they should have they may be able to retire at 66 while the national retirement age is actually 67 the reason how I came to discover this was because on the government website it allows you to check when you are able to retire and a friend of mine who had not worked as many years as I had was told that they would retire at 67 even though they were older than me but I, having worked almost my entire required life period, could retire at 66, a strange anomaly but I’m not the only one I know this has happened too.

That amount that the government give you really isn't that much if you want to retire and have a comfortable life. Dreams of Holidays and purchases beyond the essential will be long gone that's why many, many years ago we were all encouraged to pay into our own pension pots and about five years ago 2014 / 2015 for the majority of UK employees it almost became a compulsory thing the only way you could get out of paying into this was to opt out.

By fran hogan on Unsplash

In the UK you can also retire at 55 but you are expected to retire on just the money that you have saved into your pension pot and there are penalties on the amount that you will actually earn as a result of retiring either 11 or 12 years earlier. The amount that you need to retire very much is based about around what you want to take home so if you would like to take home £40,000 a mix national pension and your private pension. You would have needed to have saved £256,000 into your pension pot. For many this seems like a goal that is just too far especially when you're just beginning on your career path the average UK 16- to 25-year-old pays just around £100 per month into their employment related pension which also see top up values from an employer of around 40% of your contribution.

Pension contributions change however as your life changes and you get older, and the chances are you may earn more money this will obviously increase your contributions and also you have to bear into account that your pension provider will also have added a yearly interest, or an increase related to the stock market in this. So, if you're in your 20s and you're looking at your pension pot and it says £3000 pounds and you're thinking how I am going to get £256,000 pounds, fear not it will happen. Providing you've not taken any bad gambles with the pension pot that you have set up such as investing in high-risk stocks in hope of a better end return, when you get to around £53,000 with your monthly contributions added regardless of how much that monthly contribution is you should find that your pension is increasing anywhere between £600 and £1000 pounds a month based on Stock Exchange figures or interest rates depending on how your pension has been leveraged. When you get to around £120,000 your pension based on the same scenarios again should start to rise roughly £1500 to £1900 pounds per month. Now obviously there is the Stock Exchange that can affect and factor in on this, but you have to look at where we currently are, many of the world’s countries are in a pandemic some are feeling the final throes of a pandemic and are in recovery and pensions on the whole have not been hit that significantly. I personally still continued to see my pension grow over £1000 pounds a month each and every month (except for April 2020) throughout the whole pandemic and now as in the UK are exiting the pandemic, I'm now seeing that around £1200 a month and of course I'm still contributing to it

For some obviously £40,000 pounds a year will not be enough for them to retire so you need to be factoring in what it is that you actually want to be taking home and if your natural contributions are not enough maybe you should look at setting up a secondary pension and putting an amount of money that is going to increase that. Having done the maths I've worked out that roughly every £80,000 on the £256,000 your pension should be £8000-£10,000 a year more.

Of course, many people will opt to carry on after their retirement date and in doing so you will increase your finances based on the fact that you will get the national pension and you'll get your own private pension as well as whatever you're earning. A lot of people run by the mindset that they have experienced people that have retired and the trauma of suddenly falling out of a format leads to their lives ending somewhat prematurely. If you are considering retiring on time or ahead of time, make sure that you actually have a plan for how you are going to retire maybe it's time for you to start your own business, maybe it's enough time for you to have a side hustle such as writing articles on the Internet, take photographs, you can focus on are all these sorts of things. Or alternately do the things that you wanted to do if you can afford, to such as travel more or spend more time away with friends and family, or even remodelling your home or moving in preparation for the future. Retirement should never mean stopping and as long as we carry-on we could all live to have long and fruitful lives and the money that you've saved away through the passage of your life will make your retired life far more enjoyable

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About the Creator

Spencer Hawken

A multi-award nominated filmmaker with a passion for travel, film, finance and social media.

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