How much do you need to retire comfortably and will the state pension be enough?

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Although there’s no right or wrong answer, being prepared can help Britons enjoy their retirement to the full. spoke to Tamsin Caine from Smart Financial Planning to find out how people can make sure they get their retirement planning right.

The full new state pension is worth £9,627 which is just short of the £10,200 a year the Pension and Lifetime Savings Association (PLSA) states is needed to achieve the “minimum living standard”.

To enjoy any luxuries in retirement they’ll need to have at least double this, according to the PLSA calculations.

Tamsin told the time to start putting money towards a pension pot is right now.

The pension expert said the best time to start planning for one’s pension is the very first day of work, but if people have left it a bit later they can make larger contributions.

Tamsin said: “You can contribute up to 100 percent of your annual salary or up to £40,000, whichever is lower, each year.

“Over the long term, well-diversified investments generally perform better than cash and also beat inflation.

“The earlier you begin to invest, the more benefit compounding will have.

“As many wise people have said, the best time to start saving into a pension is when you start work. The next best time is now!”

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According to the Office for National Statistics, the average salary for full-time workers in the UK is £38,131.

The good news is it’s possible to save one million for retirement on an average wage if people start early enough.

Tamsin explains: “If you are able to save 10 percent into a pension (five percent personal contributions and five percent employer contributions, so £317.76 per month) and your investments grow at five per annum, in 10 years you would have £49,548.

“In 20 years, you would have £131,154.”

In 40 years of saving like this, someone would have £758,422.

Tamsin adds: “If we assume that the income increases with inflation of three percent (I know it’s much higher at the moment), this amount becomes £167,837.

“Increasing the contributions to 15 percent (10 percent from the individual and five percent from the employer), you would have £1,137,639.

Tamsin has some great tips for saving into a pension including considering salary sacrifice and considering asking for financial advice.

Tamsin’s top tips for saving into a pension:

  • Start saving as soon as possible
  • Make the most of your employer’s contributions
  • Consider salary sacrifice (your employer may add your or even their NI savings to your pension pot, without any additional cost to either of you), if it’s available, although be aware of the impact this will have on your mortgage capacity.
  • Be realistic – if you begin to save for retirement at age 45, it is unlikely that you will have enough to retire at age 55
  • Look into where your pension is invested and how much investment risk you are taking
  • Consider taking financial advice – an adviser will be able to help you to work out how much you need to save for your lifestyle, how much you can afford to save and the investments to use for your pension. This is best done on an individual basis
  • Be cautious of taking advice from the guy in the pub and the person on social media. This advice may not be appropriate for you!

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