The amount that need to save for your retirement, depends upon the level of income that you are going to want when you are a pensioner, so it is entirely up to you to decide how much that is.
The basic state pension is currently £97.65 for a single person and £156.15 for couples, so if you think this may be enough for you to live on, you do not need to save anything. However, if you do not want to live on such a low level of income, and the state pension will only just about pay for basics, then you will need to save more yourself.
How much you need to save is a bit like asking how long is a piece of string! It is impossible to say because circumstances are different for everyone but the simple rule is that the more you save and the earlier you do it, the higher your retirement income will be.
A report carried out by the Sunday Times revealed that if a 25-year-old invested £200 every month into a pension fund, until the age of 65, the accumulated pension fund would be enough to buy an annuity income of around £11,000, in today’s money. However if the same person did not start saving until they were 30, the retirement income could be reduced by as much as 20%
The earlier you start saving for your pension, the easier financially it should be. The Association of Consulting Actuaries recommends that 25 year olds should start a pension fund and save approximately 15% of their annual income. For 40 year olds who have not yet saved anything, the percentage rises to between 17% and 24% in order to make up for lost time.
Your retirement income does not only depend on the amount you save and for how long. It also depends upon what your pension fund provider offers, and whether they are underperforming or over charging. Pension providers vary so it is important to keep an eye on their performance and change providers if necessary.
The type of fund that your pension monies are invested in will also make a difference to the outcome. Investing your pension fund in equities offers higher returns but carries extra risk in the short term; whereas fixed income products are unlikely to reap the same rewards but are safer.
To get the most out of your pension fund you should contact an independent financial adviser to find out how to save for your retirement in the way that suits you best, depending upon your age and circumstances. That way you can generate the best retirement income from the funds that you have available.