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It's important to think about how much money you might need in the future and whether you'll have enough to give you the lifestyle you want. You might be eligible for the State Pension but can you manage on this alone? Also, you may want to retire before your state pension age.
Making the right choices now could make a big difference to how much money you have in the future and saving into a pension plan could help you achieve the lifestyle you would like.
Putting your money into a pension plan is one of the most tax efficient ways to save for the kind of life you want in the future. You normally get tax relief on the payments you make into a pension plan which are invested so they have the potential to grow and help you build up your pension savings.
If you have a workplace pension, your employer will pay into it too. Sometimes they make matching payments up to a certain level. So, if you save more, they may add more too.
One of the great things about saving into some pension types is the tax relief you can get. If it applies, this means that if you're a basic rate tax payer, for every £100 saved into your pension plan the cost to you is only £80. This could effectively be even less if you're a higher or additional rate tax payer.
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The amount of money you're going to need in retirement depends on the type of lifestyle you want. We've created a retirement tool to help you understand how much money you might need to achieve the lifestyle you want.
Simply pick from our list of things to do in retirement, and we’ll give you an idea of how much money you may need to make it happen.
What kind of life would you like to lead when you've said goodbye to the 9-to-5? Create a vision of your ideal retirement and we'll give you an idea of how much money you'll need to fund it.
The Joseph Rowntree Foundation (JRF), a respected charity, recently asked members of the public what counts as a minimum acceptable standard of living — one that includes more than just essentials such as food and somewhere to live.
Based on these answers, JRF worked out what income people need to achieve this — which was around £10,200 a year for a single retired person.
This assumes that, come retirement, people should still be able to buy birthday presents, have a week's holiday in the UK, buy alcohol and visit the cinema. They should also have some of the things we take for granted now, that we didn't used to: mobile phones, DVD players and internet access, for instance. It also assumes that they'll have paid off their mortgage.
There were some things that weren't seen as necessary for an acceptable lifestyle once you retire. The £10,200 assumes public transport, not a car and it assumes no dishwasher, no cigarettes, no paid-for TV — and spending less than £20 a month at a restaurant.
The figure of around £10,200 is for a single person — a retired couple need about £15,700 a year between them (as it's cheaper for two people to live as a couple).
And these figures are only a guide. Everyone's idea of what constitutes an acceptable standard of living is different — if you live in a remote village, for instance, there may be limited access to public transport and a car may, instead, be seen as essential.
You can read more about the research at the Joseph Rowntree Foundation.
The final figure we show is higher than the sum of the options you've selected. This is because it's based on the amount you would need to earn, before tax is deducted, to pay for the items you've chosen. We’ve based our calculations on a single person currently aged 64, retiring after April 2020, paying 20% tax, with a personal allowance of £12,500. The tool does not take into account Personal savings allowance, Dividend tax allowance or Lifetime Allowance. The figures will change if your personal circumstances are different (i.e. do not match).
The £10,200 figure for basics assumes a one-week UK holiday. If you want European sun, we've assumed you'll spend approximately £2,300 on an all-inclusive holiday for one, with £500 spending money.
You can beat the winter blues without spending a fortune. Around £5,500 is for a four-week stay (self-catering) in a Florida apartment for one person, including flights and £400 spending money a week.
A car that costs £15,000 new will set you back roughly £2,970 in running costs each year. And if you want to replace it every five years, you'll have to save a further£3,000 a year towards it.
If you like to stay in shape, you'll have more time for exercise. Whether you like to raise your heart rate on the treadmill, pump iron or practise pilates, joining a health club will cost you around £650 a year.
The £1,200 figure covers a ticket for one, a train fare and a meal 12 times a year.
If you like to go out now, that's not likely to change when you stop work. We've assumed £40 every other week for dinner out, and £30 every other week for drinks out – total £1,800 a year.
We've put down an annual figure of £1,500 – whether you spend it on the latest gadgets or the latest fashions is up to you.
We've allowed an annual spend of £3,000.
Are your pension savings on track for the retirement lifestyle you want? Use our pension calculator to see if you're saving enough.
You could help boost your pension savings by paying in more each month. A small increase over time can make a big difference. You can also make a lump sum payment if you find you have extra to spare.
You can take advantage of the tax breaks and you could take advantage of potential investment growth. But keep in mind your money is invested so the value can go down as well as up.
If you have pension plans elsewhere, you could bring them together and have all your money in one place so it's easy to manage. Keep in mind that transferring may not be right for everyone.
The money in your pension is usually invested which means it has the potential to grow in value. The decisions you make about your investments can have a big impact on the amount of money you have in the future so it's important you understand your investment options.
You can find out more about your investment options on our Investments page.
How long you’re invested for also plays a big part in the amount of money you could get back at retirement. Generally, the longer you can keep your money invested, the more potential it has to grow. If you want to learn more about investing over the long term, you can read our MoneyPlus blog.
A pension plan from Standard Life can be a great way to save for the future you want when you retire. Our Active Money Person Pension (AMPP) is a simple and tax-efficient way to save for your retirement.
You can decide whether you want to pick your own funds or let the experts help. Choose your investment options when you set up your plan.
This could be a good option if you’re new to investing, or if you don’t have time to manage your own funds.
This could be a good option if you want to choose and manage your own pension investments. You can review and switch funds easily.
Use our financial health check tool to see how your finances are doing and get some ideas to shape up your money.
It can make sense to have just one pension plan to make your savings and investments easier to manage - but it's not right for everyone.