Am I on track for my retirement?

Looking towards your retirement can be a nice daytime distraction.
Planning ahead will help ensure you’re on track for the financial future you want.
Let’s take a look at what you might need to retire your way.


Life on the State Pension

The age for when you can start to receive your State Pension is rising. You’ll need to consider how much of the State Pension you might get and whether what you receive will be enough to live the life you want in retirement.

Could you live the life you want on the current State Pension?

When planning your later life you are often asked, “how much do you want to live on each year in retirement?”

We have put together these case studies to help give you an idea of what you might need.

The current State Pension 2017/18

£159.55 per week

That's about

£690.00 per month

or

£8,296.60 per year

You should check what age you can start to receive your State Pension. You can also check to see your eligibility for the full amount. 

What this means...

The total annual household spend in this example of £8,081 does not leave much for those unexpected events or even the nice-to-haves. And don’t forget these figures don’t include any mortage payments or rent you may have.

The numbers here are based on a person’s share of the average household bills for two people who are mainly dependent on the State Pension.

We’ve added up these figures using today’s money, so you should also think about how costs may go up by the time you are ready to retire.

Figures based on Office for National Statistics UK national average expenditure of two adult retired households maily dependent on State Pension UK financial year ending 2016.

*Based on average £1,185 Council Tax for England in 2017/18, source ONS. Assuming the individual owns their own home without a mortgage.

Where that money might go on an annual basis.

Retirement planning chart

How much might I need?

Building your financial future starts today.
Living the life you want in retirement might mean more than the current State Pension.
Our case studies can help you understand what different levels of retirement income might look like.
We know you are an individual and not a case study, so these are just to help and are not a recommmendation.

Rachel portfolio picture


Rachel, 66, Target annual income, £12,000

Rachel is ready to retire, she has just celebrated her 66th birthday and has a pension pot of £100,000.

From her pot she was able to take a 25% tax-free lump sum of £25,000 which she used to help fund her son’s wedding and pay off the remainder of her mortgage.

This left her with a £75,000 left in her pension pot which she is able to take in flexible monthly amounts as part of a drawdown plan until the money runs out. Which will be quite some time, if she sticks to her budget.

Knowing that her spending habits will change now that she is no longer working, Rachel set out to create a budget that would fit her lifestyle in retirement. Once a week she meets her friends for a few drinks and the occasional trip to the theatre. This costs her about £30 each week. And she still wants to make sure she and her husband can escape to the sun for a couple of weeks each year. Rachel has set a target retirement income of around £12,000 a year. She thinks this will be enough for the basics and one or two nice things throughout the year.

With the options she has chosen, Rachel’s pension pot will last her for 31 years. So when the money is gone she will need to rely on the State Pension. By which time she will be 97, so Rachel thinks she is on track for the retirement she hopes for.

Let's look at her yearly numbers

The income from her drawdown can be added to her state pension and go towards those things that she is keen to keep up in retirement.

State Pension

£8,296.60

Drawdown

£3,680.00

Total income

£11,976.60

Total after tax

£11,881.28


Total outgoings

She still has the same outgoings as most people her age.

Average outgoings

£8,081.00

Two week holiday

£1,200.00

Weekly outing with friends (£30)

£1,560.00

Total outgoings:

£10,841.00


What this means...

This would leave Rachel with around £1,040 each year after paying tax or about £87 per month for other essential items or a few nice-to-haves. Rachel is able to use her extra pension income for a few luxuries, but she still has to budget incredibly carefully in order to be able to maintain the lifestyle she wants to lead in retirement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case study is based on a 20% tax-rate and a Personal Allowance of £11,500 for 2017/18. No other income is taken into consideration. The investment growth is calculated at 3% per year and this is not guaranteed. It does not include charges which may apply. The actual amount you receive will depend on the option you choose and your circumstances at the time.

Rachel portfolio picture


Richard, 66, Target annual income, £15,000

Richard is looking forward to his retirement, he celebrated his 66th birthday surrounded by his grandchildren and friends. He has a love of travel and is keen to see more of the world in his retirement.

Richard was fortunate enough to have saved £100,000 into his pension pot. He chose to take the 25% tax-free lump sum of £25,000 and used this to pay the remainder of his mortgage.

This leaves him with £75,000 remaining in his pension pot. He has set a target retirement income of £15,000. Richard believes that he can live fairly comfortably on this amount.

After going through his retirement options, with his target income he sees that if he opts for a regular monthly income from a drawdown plan his money would last for 13 years. Richard likes to stay fit at the gym and can’t wait to get working on his backswing at his local golf club. When not on the golf course Richard also likes to spoil his six grandkids.

Richard is aware that when he reaches 79, the extra income from his pension pot will have ran out. So he will have to rely on the State Pension in around 13 years' time which will significantly alter his lifestyle.

Let's look at his yearly numbers

So his yearly budget looks a little like this:

State Pension

£8,296.60

Drawdown

£6,700.00

Total income

£14,996.60

Income after tax

£14,297.28


Total outgoings

He still has the same outgoings as most people his age.

Average outgoings

£8,081.00

Winter sun holiday

£1,500.00

Restaurants

£1,320.00

Gifts for grandchildren

£492.00

Golf club membership

£1,386.00

Car maintenance

£1,110.00

Home improvements

£1,110.00

Total outgoings:

£13,889.00


What this means...

That means that Richard’s budget is still pretty tight outside of this. Leaving him £408 per year. So he may want to cut back on the other luxuries in his life or consider taking a lower amount over a longer period. Well, maybe not the gifts for the grandkids! 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case study is based on a 20% tax-rate and a Personal Allowance of £11,500 for 2017/18. No other income is taken into consideration. The investment growth is calculated at 3% per year and this is not guaranteed. It does not include charges which may apply. The actual amount you receive will depend on the option you choose and your circumstances at the time.

Looking for financial advice?

Meet with a Prudential financial planning adviser – The Man from the Pru. We can review your retirement plans, advise on where to save money and help make your finances more tax efficient. We’ll even meet you in the comfort of your own home. 

Find out more

Where can I learn more?

Call us on 0800 000 000 9am-5pm, Monday to Friday

Our dedicated teams are here to help answer questions you might have when you are ready to retire.


 

We recommend you use Pension Wise, a free impartial guidance service from the government to help you understand your options at retirement.

Visit pensionwise.gov.uk or call 0300 330 1001 to book a phone or face-to-face appointment.

Visit the www.hmrc.gov.uk to get information on tax rules and legislation which may affect you of you have a pension plan or looking to access your options.