As we wait with bated breath for news on Coronavirus restrictions being removed, I thought you might find the article below, I saw in the Times last week, of interest.
The figures quoted look remarkably low to me, but I suspect that reflects the fact that we live in a relatively affluent bubble in the South-East.
It is a shame that the main assumptions Which? Magazine have used for Income Drawdown are not included but one which did catch my eye was that it was assumed income would be exhausted at age 85, which is quite close to average life expectancy for a man of 65. The obvious problem arises if you happen to be in the 50% who will live longer than average but have no income left. Our Financial Models all assume life expectancy of 100 for this reason and even age 100 these days may not be long enough for some people.
“The price of a comfortable retirement for a couple encompassing holidays, hobbies and alcohol has been found to be £26,000 a year.
Research by the consumer magazine Which? suggests that while £18,000 a year will cover the “essential” needs of a couple, an extra £8,000 annually will help to provide for meals out as well as short-haul European holidays.
And if health club memberships, long-haul holidays and a new car every five years are desired, then £41,000 a year would be required.
For a single person Which? calculated that £13,000 would cover the basics, £19,000 a comfortable retirement and £31,000 the more luxurious items.
Which? surveyed nearly 7,000 retirees in February about their spending to develop retirement targets for one and two-person households.
It said that savers needed to be given more clarity about their pension savings and what incomes would be required to sustain certain standards of living.
Jenny Ross, its money editor, said: “For many people, the events of the past year will have caused them to rethink their retirement plans and brought the amount of money needed for later life into sharper focus. “Our research shows that most people will need to be putting away significant sums if they want to ensure they can enjoy a comfortable retirement — but many do not have access to the clear and accessible information they need to help them plan.”
Which? found that, on average, couples need a pot of about £155,000 alongside their state pension to produce the annual income for a comfortable retirement of £26,000 using pension drawdown — or just over £265,000 through a joint life annuity.
For single-person households, a comfortable retirement would need a pot of about £192,290 alongside a state pension to produce an annual income of £19,000 using pension drawdown, or £305,710 through an annuity, the research suggests.
The calculations for pension drawdown were based on the saver drawing off all their income over 20 years from the age of 65 and also made certain assumptions about investment growth, inflation and charges.
According to the survey, retirees in two-person households spent about 14 per cent less on recreation and leisure and 10 per cent less on transport than before the coronavirus pandemic, but spending on cars, groceries and charity donations had risen 6 per cent.”
Please do not hesitate to contact me if you have any concerns or questions relating to anything in this e-mail or indeed any other finance related matter.
Yours sincerely,
Graham Ponting CFP Chartered MCSI
Managing Partner
