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Wealth Management News

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23 Jul 2014

UK Savers

Saving for retirement is increasingly important for British employees, but it may already be too late for them to secure an adequate income in their later life, according to pension provider Liberty SIPP. In fact, recent research by the firm suggested that in order to retire at 65 with an income worth half the current average salary, a newborn baby today would already be 30 years late in their pension planning.

The research suggests that a combination of factors, such as low portfolio growth rates, unimpressive yields and increasing human longevity, has had a significant effect on pension saving; resulting in a total time of 95 years of saving needed to ensure a decent retirement income.

Liberty SIPP calculated that securing £13,500 of annual pension income at the age of 65, after taking the 25% lump sum exempt from tax, would require a total pension pot of £250,000. Based on an average saving rate — which according to the research is putting aside just enough to generate the average British pension pot size of £30,000 by 65 — would require saving up for 95 years. If the 25% tax-free lump sum is not taken out, the required pension pot for securing the £13,500 annual income will be £188,000, the pension provider added.

In fact, most people manage to put aside far less than that. A 21-year-old worker will have to start contributing £1,734 annually, which is more than eight times the current average rate of saving, in order to build up a £250,000 pension pot before they retire, IFA Magazine reported.

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