Every month, more than ten million people squirrel away some cash towards retirement. But are we saving enough to live comfortably in later life – and retire when we want? Surprisingly few people are able to answer that question. Although one in four aims to retire at age 60, many simply have no clue what their pension savings will afford them. No two retirements are the same. The amount you will need will depend on a multitude of variables, including the type of lifestyle you want, the state of your health, your normal expenditure, who else you live with and much more. The figures are only a guide to give you a sense of the level of saving you may need to consider. For these calculations, The Telegraph has assumed that pension contributions are fixed every month, and that investments grow at five per cent a year, inflation is two per cent, and annual management charges on your pension are 0.5%. They have also assumed that the pension pot will be used to buy a single life annuity to provide an income for life. In reality, many savers are choosing not to buy an annuity, but rather to manage their own pension income through drawdown. If you start early, not only do you have longer to build a sizeable retirement pot, but thanks to the power of compound interest, the pension contributions that you make early on have time to grow with no extra effort from you required. So, for example, if you want a moderate lifestyle in retirement from the age of 65, you need to save £355 every month from the age of 22. But, if you started saving at the age of 40, you would need to save almost double that amount – £690, to have the same retirement. In fact, so valuable are those pension contributions early on in your career that if you saved £100 a month from the age of 18 to 38 (20 years of saving) and then stopped, you would likely have more by the time you hit retirement age than if you saved £100 a month from age 38 to 68 (saving for 30 years). The simplest way to achieve a comfortable retirement is to start saving early, regularly and save as much as you can. But that’s easier said than done. When times are tight – as they are set to be this year in particular with rising household bills and inflation – sometimes it can be hard to prioritise an event years or even decades away. So, another option is to delay retirement if you can, as our figures show. For example, to receive a comfortable income from the age of 55, you would have to save a massive £1,360 a month from the age of 22. But if you delayed retirement until age 70, you would need to save £555 per month.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of January 2022 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.