COMMENT
Securing Your Comfortable Retirement

Last week the University of Essex published research which revealed that eight out of ten workers expect to retire before or on reaching the state pension age. Four out of ten of them currently have no form of pension provision other than that offered by the state pension.

None of which is new. Most research into our retirement expectations shows that vast numbers of us continue to live in La-La Land when it comes to pensions.

The reality is that the average pension pot contains less than £30,000 on retirement which for a 65-year-old man would buy an index-linked annuity income of little more than £1,500 a year. The full basic state pension is £4,266 a year. Even with the extra provided by the second state pension (which is based on earnings), many people's retirement income isn't going to get them very far.

It's hardly surprising that half of today's pensioners are entitled to pension credit and that retirees who own their own homes are downsizing or releasing some of the equity they have.

It may be ambitious but the fact is if you want a comfortable old age, you need to accumulate a retirement pot of at least £400,000 whether it's through pension schemes, ISAs and/or property. At current rates, this should get you a retirement income of about £20,000 a year. Coupled with what you're entitled to from the State when you reach 65, you'd be able to enjoy a very comfortable retirement indeed.

If you want a ballpark figure of how much you should be saving, and assuming you don't have any existing savings, then halve your current age and use the resulting figure as the percentage of income you should be putting away. So, if you're 30, you should be saving at least 15%; if you're 45, it should be at least 22.5%.

It depends on how much you earn of course and where you invest your money as to whether you could achieve that pension pot of £400,000 but at least it's a target to aim for. As Dusty Springfield might have said, it's better than just wishing and hoping and thinking and praying, planning and dreaming...

Check out these tax-efficient ways to save: Pensions & ISAs.