Younger Britons retiring in 40 years’ time may need to save up double the amount currently needed in pensions for their retirement.
Figures from interactive investor found that currently, a person needs £490,000 saved up for a comfortable retirement but this could more than double to £1,081,939 in 40 years.
They created the projections using figures for the current costs of retirement from the Pensions and Lifetime Savings Association, based on a two percent inflation rate and a £8,000 per £100,000 annuity rate.
The researchers also found that the amount needed for a moderate retirement will increase from the current £300,000 to £662,412 in 40 years’ time.
Alice Guy, head of Pensions and Savings at interactive investor, said: “Our calculations shine a light on the punishing impact of inflation over time as the amount needed for a comfortable retirement is expected to double over the next 40 years.
“Inflation makes it much harder to achieve your retirement goals, eroding the value of your savings and income in real terms over time.”
Ms Guy said the figures showed the need for people to build up private pension wealth. She explained: “Saving into a pension is one of the best ways to build long term wealth because investments tend to outstrip inflation over time.
“If you’re planning to retire before the state pension age you may also need to save more because you’ll have a gap to bridge before the state pension kicks in.
“Worryingly, these figures don’t take housing costs into account, so those renting could need even more. We know that many more people are now renting in their 40s and 50s and many are likely to continue renting into old age, making retirement a lot more expensive.”
One step people can take it to increase their pension contributions if they get a pay rise, as this can add up over time.
Lily Megson, policy director at My Pension Expert, previously spoke to Express.co.uk about some of the less well known benefits of pensions.
She said: “People often underestimate the hidden benefits within pension schemes.
“For instance, some schemes offer a guaranteed annuity rate, a potentially valuable advantage that individuals may not be aware of until later down the line. It’s crucial to scrutinise the details of your pension plan to uncover these hidden gems.”
She urged savers to make sure they explore the market and understand their options. She said: “There’s a vast array of options available ranging from passive funds to discretionary funds, each offering different risk levels to suit individual needs.
“People should feel empowered to search the market and ask questions to find an option that aligns with their financial goals.”
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