Martin Lewis shares simple way to work out how much money to save every year for retirement
The focus on pensions has ramped up over recent weeks following reports that the State Pension age could be rising to 68 earlier than planned, effectively meaning that everyone currently aged 54 and under will need to work longer. People with private or workplace pensions will also have to wait until they are 57 to access retirement savings due to changes coming into effect in 2028.
An example of this is someone who is 30 would need to save 15 per cent of their annual income every year. If they earned £30,000, they would need to put away £4,500 each year, the equivalent of £375 each month. Without the effect of inflation, the calculator estimates that a pension pot currently worth £50,000 could equate to £94,023 by 2033, assuming 5% investment growth and £1,000 in contributions each year. However, the net effect of an assumed 2.5% rate of inflation means it could actually be worth just £75,208 in today’s money.
The calculator also indicates how the price of everyday goods could rise in the future due to inflation. It shows the average pint of beer could be £61.20 by 2050 if inflation were to remain at 10.5% each year, however this is highly unlikely.
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