A 25-year-old today will need more than \u00a33 million in their pension pot to have a \u201ccomfortable\u201d retirement, new analysis suggests.<\/p>\n
A comfortable standard of living as defined by the industry body Pensions UK would include one holiday abroad a year, some weekends away in the UK and weekly meals out.<\/p>\n
Even for a \u201cmoderate\u201d lifestyle, including one foreign holiday a year and a weekly takeaway, a Gen Z pensioner would need a pot of \u00a32.2 million. The \u201cminimum\u201d standard of living \u2014 where basic needs are covered and there is some left over for a UK holiday once a year and eating out once a month \u2014 would require a pot of \u00a3947,000. <\/p>\n
The analysis by the wealth manager Rathbones was based on Pensions UK\u2019s assumptions about how much money a retired person today would need to achieve the different lifestyles. It says that for a comfortable retirement in 2025 you need \u00a343,900 annual post-tax income, for a moderate lifestyle you need \u00a331,700, and for a minimum \u00a312,400. <\/p>\n
Rathbones worked out its predictions for a 25-year-old retiring at 65 assuming that inflation will average out at 2 per cent a year for 65 years \u2014 40 years up to retirement at 65, then 25 years in retirement. Its analysis does not include state pension entitlements, and does not take into account housing or care costs.<\/p>\n
It suggests that to reach this comfortable retirement pot, a 25-year-old would need to be putting into their pension \u00a31,600 a month (from their salary and their employer\u2019s contributions). If their employer paid the minimum 3 per cent, they would have to pay in \u00a31,000 a month. This is assuming that contributions will rise 2 per cent a year through pay rises, and that the pot will grow 5 per cent each year.<\/p>\n