Martin Lewis lays out how much you should be putting in your pension
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On his Ask Martin podcast from BBC 5Live, the money expert answered a listener question regarding retirement planning, and how much one has to save to be on track for the retirement she wants. Although most retirement calculations are based on assumption, he suggested a method that can be used as a target so people know how much they should be saving in their pensions at each age.
With state pension age constantly changing, Zoe Edwards said she was confused as all pension calculators are giving her different results, and she did not know if she was on track for the retirement lifestyle she desired.
However, Martin explained that even if he knew the lifestyle she wanted to lead in retirement, it would be hard to give her a solid answer and there is not one.
He said: “Unless you’re with some type of old final salary pension, assuming you have a standard pension in a pension tax vehicle, then your money is invested.
“The two biggest factors are how much money you put in and how well the investment does.
However, he explained that the amount of money needed in a pension for a “decent retirement” should be calculated based on someone’s age.
He warned that the calculation he gives may not be quite right for everyone, but it offers suggestions for a good target that people can work towards.
The money saving expert continued: “A decent retirement is about two thirds of your salary. Take your age when you first start saving for your pension.
“So, let’s say someone is 30 – half it to get 15. You should then be aiming to put 15 percent of your salary in for the rest of your life.”
Even though this may seem impossible for some people, he mentioned workplace pensions and how they also contribute to retirement and match the amount the one puts in.
For workplace pension schemes, the minimum amount that someone puts in is four percent, and they get one percent tax relief from the Government and their company gives them an additional three percent.
“This is already eight percent going in,” he said.
Mr Lewis continued: “The bigger message you should get from this is the earlier you start the better.
“There are calculators out there that will give you a loose indication, but the answer is start early and put as much in as you can afford to do, and you will have a better retirement.
The state pension can be used to top up one’s retirement income however they should be that this payment start may be delayed.
For people reaching State Pension age now, it will be age 66 for women and men.
For people reaching state pension age now, it will be age 66 for women and men.
The full level of the state pension is £179.60 a week in the 2021/22 tax year, which produces an annual income of £9,339.20.
The amount people get might be lower, as their entitlement to state pension depends on their National Insurance record.
People need a minimum of ten years’ contributions or credits to get any state pension, and 35 years on their record to get the full new amount.
Ask Martin is available to listen to now on BBC Sounds.
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