The average pensioner’s annual income is £19,240, so how much do you need to save?

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The average pensioner’s annual income is £19,240 – how much do you need to save?

The average pensioner receives £19,240 per year, but saving enough to fund that retirement income is difficult.

Many people are unsure of where to begin.

People who rely solely on the State Pension will fall far short.

Building a personal savings account is critical, but many people face two issues.

The first is that most people have no idea how much total savings they’ll need to retire comfortably.

The second reason is that they have no idea how much annual income their savings will provide.

Andrew Tully, technical director at Canada Life, is a pensions expert who has provided answers to both of these questions exclusively for Express readers.

The average pensioner received £19,240 in retirement income in the 2019-20 tax year, according to official figures.

This included the State Pension and benefits, which averaged £9,412 per year.

This amounts to roughly half of their total annual income.

“Pensioners then generated a further £9,828 from their own resources,” according to Tully, citing workplace and personal pensions, tax-free Isas, and other retirement savings.

Given today’s low interest rates, the answer may surprise and disappoint many.

According to Tully, a pension pot of around £192,000 would be needed to buy a guaranteed income of £9,828 per year at age 66.

This would buy you a single life annuity with a fixed income that does not rise with inflation and no death benefits for a partner if you die first.

Tully calculates that if you wanted your income to increase by 3% per year, you’d need £294,000 in pension.

That’s a lofty goal, so how much do you need to save each month to achieve it? Tully has crunched the numbers once more.

A 25-year-old would need to save £147 per month to accumulate a £192,000 pot.

The good news is that they would only have to pay £117 after basic rate tax relief.

Someone starting at the age of 40 would need to save £325 per month.

The total cost is £260 after basic tax relief.

Both of these figures assume a four percent annual growth rate for the investments.

This demonstrates the importance of saving as soon as possible, according to Tully.

“The sooner you start, the longer your life will be.”

“Brinkwire News Summary.”

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