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Erm, well, no

Workers need to have a nest egg of at least £645,000 if they want a comfortable lifestyle when they retire, new figures show.

A single person would require an annual income after tax of £26,700 on top of the full state pension, according to a report from the Pensions and Lifetime Savings Association. This would fund three weeks holiday in Europe each year, a £144 weekly budget for food and £56 on birthday presents.

Add in that state pension and we’re over £32k. Which is median full time income. So that definition of “comfortable” is perhaps more than a bit too high?

18 thoughts on “Erm, well, no”

  1. A SINGLE person spending 144 QUID ON FOOD????? I’m a single person and my weekly food spending is typically about £25. WTH are they eating, gold leaf? Even if I went out for lunch every day that would still only get to about fifty quid.

  2. Pretty sure the plan is to steal my pension to pay the pensions of all those people they said were coming here to pay my pension, Tim.

  3. And consider that if you’ve still got a mortgage at the age of 67 and have lived through the economic fluctuations of the last 30 years you deserve to live off ants and dandelions and have a snowball in August as your birthday present.

  4. From April the state pension after 20% tax will come to a shade under £8500. Add the quoted £26700, winter fuel payment etc and you’re within spitting distance of £3k per month after tax for a single person.

  5. I recall some years ago a wise old hand warning me that with time on my hands, places to go and things to do, homes to heat, medical bills and taxes to pay, you (arguably) need a larger income when retired rather than a smaller one.

  6. Hmm, their math seems a bit dodgy – if you have #645k and you earn just over 4% per year (4.13% to be precise) you have #26.7k and never touch your capital. If you have a life expectancy of 20 years and invest at that rate you can spend #48k per year, using up your capital by year 20. If you want 30 years of payments you can still spend #38k per year. And at 6% per year (not a stretch for a moderately conservative investment mix) you’d only need #306k to get their #26.7k per year for 20 years.

    It seems whenever I see an article about how much people need to save in order to retire the numbers would tell you that the vast majority of people can never retire, and yet they do.

  7. Echoing Steve, it almost seems pointless saving for a pension, since you know the greedy buggers will take it off us by then. (Unless it’s a state-backed defined-benefit pension like the NHS, pbuh.)

  8. @jgh

    ‘ I’m a single person and my weekly food spending is typically about £25. ’

    Where are you shopping – food banks? Or do you live in a Third World Country?

    Today Lidl… loaf of bread, fresh blueberries, yogurts, cheese, apples, bread & butter pudding….£13-60. Not extravagant and for more than one day, but no meat or fish or anything for main meals.

  9. @John B – jgh is notoriously thrifty.

    The £144 pw includes the cost of eating out (not clear if it includes wine either at home or out) so is easily achieved. In my few weeks in the UK round Christmas, I only ate out a couple of times in provincial town pubs and restaurants but you still easily get to £40-50 a head for two courses and a couple of drinks.

    This study assumes you will use your pension pot to buy an annuity, which seems unlikely unless you’re going gaga and can’t manage your finances. It also assumes you will spend the same aged 67 as at age 87, which seems unlikely.

  10. @Andrew M
    I’ve actually planned a life on this basis. It was the one thing I took away from school O-level economics. That government unfunded spending commitments always grow faster than productivity. It seemed obvious even then, that the State Pension/Welfare/NHS commitment would eventually consume all of taxation. So they’d have to come after your savings. So it wouldn’t matter how you saved, if they could get at it, they will.
    So I’ve probably missed out on a lot of benefits along the way I could have claimed but my dosh is buried so deep now they’ll never be able to find it. So far it’s working out fine.

  11. Look at who provides the “information” quoted by the journalist is a good maxim.
    The Pension and Lifetime Savings Association – is it conceivable that they have a vested interest in persuading workers to put a few extra £s (or £ks) into their pension pots and savings accounts?
    Then they use “comfortable”: their OAP doesn’t walk to the shops if it’s raining – orders from Ocado instead; he/she doesn’t wait for a unreliable bus/tube when he/she can afford a taxi; central heating on all day in winter; silk next to the skin is comfortable …

  12. “silk next to the skin is comfortable …”: unless you are the unwanted brother of a new Ottoman Emperor.

  13. Unless you have a golden public sector pension, you have to box clever. My working background is all private sector. It didn’t take me long to realise that private pensions were not going to hack it in retirement – certainly not the sort of numbers in the article. So I split my investment in retirement: paying off the mortgage early; some pension; and some savings.

    For savings, I had in mind something similar to Estaban’s theorem. Okay, so savings are after tax, whereas pensions are tax deductible. Savings are, therefore, less efficient, but easily accessible and the capital can substitute for income in the way Estaban explains. Besides we can downsize the house and realise more capital.

    My pension turned out well, because some research work for a report in 2006 unearthed all the signs of an impending recession. I took a chance and started my private pension early (I was over 55). It was a prescient move. I got a high annuity rate – double what you can get these days. And I’ve been drawing my pension now for 18 years. It’s always better to have money now than later.

    As to expenditure, I don’t recognise the numbers. Being a sad OCD engineer, I’ve always kept a really accurate account of expenditure. We (the wife and I) spend 24,000 GBP per annum, and we have a decent surplus for anything unexpected. We don’t stint on food, and we eat out. Our largest expense at just over 100GBP per week is ‘housekeeping’ – food, good wine and consumables (eg cleaning materials). Heating is next (no gas in our village, so expensive) followed by council tax, car expenses and private dental. As for holidays, yes, but nowadays we prefer the UK, and with 4 kids and lots of grandkids we can do the Royal Progress.

    BiS – yes, the gubmint could go after our savings, but by that point the whole country will be f**ked and we’ll have riots.

  14. @Yet Another Chris
    Government have been going after people’s savings since 2008, in just one way. Artificially low interest rates.

  15. I dunno, Bernie G, I think it depends on your interests – I have enough books to re-read, computer games to finally finish completely, tv shows and films to rewatch, I could never spend another penny on anything and it’d probably last me…

  16. @ JuliaM

    I can identify with that. Although I spent much of my career on an aeroplane flying to or returning from various places, when I initially hung up my spurs I continued on for several years, partying and hanging out in the usual places, France, Spain, Portugal, etc. Eventually ran out of steam and settled down – for the past 10 years have rarely crossed the county line, zero ‘holidays’ except the occasional weekend in Bath. Haven’t boarded a flight in more than a decade. Can’t summon the enthusiasm. Principal outlay is my abiding passion – food and wine. I own more books than I could ever read…have a wireless. Never owned a smart phone – limited signal hereabouts, local broadband only 0.8mps. There’s nothing I long for and no place I want to visit.

  17. Just plain ordinary shopping. I’ve posted this before. This has been my recorded average weekly food spend, on everything, groceries, cafes, service stations, work canteens, etc.
    2013-14 £26.11
    2014-15 £17.52
    2015-16 £20.42
    2016-17 £26.13
    2017-18 £20.28
    2018-19 £24.50
    2019-20 £24.73
    2020-21 £21.18

  18. I’m with JuliaM on books. We’ve got seven bookcases full up. So maybe 600 to 700 books? I’ve never counted. Anyway some I haven’t read for 30 or more years so, being semi senile, the older books are like first time reads! I’m presently reading my Jack Reacher collection. Nice!

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