£155,000 just to enjoy a bottle of bubbly – No, that’s not a Premier League player’s bar tab, it’s how much you might need in your pension pot in order to live a ‘comfortable’ lifestyle (including the odd glass of champagne) according to a recent Which? survey.
Data was gathered from 7,000 retirees who were asked to provide details of their annual spending, and the results act as a serious and sobering reminder about how much retirement could cost. The feedback was used to work out roughly how much annual income would be needed to live a ‘financially happy’ retirement based on the current cost of living. Which? experts broke it down into three lifestyle categories (essential, comfortable, and luxury). Essential means just enough to cover the basic costs of living. Comfortable covers additional expenses such as an annual holiday, occasional nights out, and the odd glass of champers. Luxury includes the cost of all the items listed in the essential and comfortable categories plus, for example, exotic holidays, 5-star hotels and of course the finest Champagne.
Which? experts worked out that on average couples need a pension pot of around £155,000, plus their state pensions, to give them an annual income for a ‘comfortable’ retirement via pension drawdown – or just over £265,000 through a joint life annuity. If that sounds like a lot, it’s also worth considering that the survey was carried out in February 2021 when many of the retirees are likely to have spent much of the previous 12 months in lockdown and had fewer opportunities to spend on holidays, nights out etc. In a ‘normal’ year their spending would probably have been even higher. The data published by Which? doesn’t specifically mention expenses such as school or university fees for children or grandchildren, or care home fees for older relatives – so those are factors worth bearing in mind because they may increase costs too.
‘The Which? study is just one example of a wealth of research which shows the potential cost of retirement,’ says pensions expert Stephanie Hatton from Zurich International Isle of Man. ‘It’s understandable that many people with busy lives who are working hard, week in week out, put off making pension plans because they think it’s not a priority right now. However, as the figures quoted in the Which? survey show, it’s never too soon to start saving. That’s one of the reasons why we’re supporting Pension Awareness Day (@PensionDay) on September 15 because it’s an effective awareness day that encourages people to think about their retirement plans.’
‘If you are in your 20s, starting to invest in a personal pension doesn’t need to be expensive,’ adds Stephanie. ‘If you budget sensibly you can still enjoy the lifestyle you want to have right now, and have the reassurance that comes from knowing you’re on the road towards realizing the dreams you have when you retire. For employers, Pension Awareness Day is also a good time to think about how employee benefits can help them to recruit and retain valued employees. We already have many Isle of Man businesses using our Group Life and Income Protection solutions – they’re both cost-effective investments which give businesses an edge that can tip the balance when prospective employees are making that important decision to choose one employer over another.’
Whether you envisage a Champagne lifestyle or just enough to cover the basics when you retire, Zurich International can help you start making plans. To find out more please click here to see the Zurich International Simple SIPP brochure, or contact your Independent Financial Adviser.