Research indicates lower pensioner funding needs

With the coming election in the UK, the topic of pension money has made many headlines over the last few weeks. One of the scarier warnings involve projections of the huge amounts that will probably be necessary to enjoy any sort of life quality between the ages of 65 and 85.

So the question is: will we really need £600,000 to ensure a comfortable retirement? Pensioners and those nearing retirement age will be relieved to hear that the answer is relatively certain “no”, provided that pensioners use their savings and annuities options wisely.

A "This is Money" article cites fresh research that places the amount needed to retire at £565,000, which is really not very far from the popular £600,000 figure so often quoted by the media.

So how to fund our groceries, electricity bills, and odd entertainment opportunity when we retire? In addition to general savings and pension accounts, it is also worth checking out the annuity option.

Saving about £300,000 in a pension scheme and purchasing an annuity in retirement is projected to be the best way to meet the needs of pensioners during their old age. Annuities pay a fixed income throughout the years of retirement; supplemented with pension savings, they are therefore an excellent way to obtain financial security.

So although pensioners need only to save half of the popularly quoted £600,000, it is still a tidy sum to have to scrape together in an increasingly short space of time as the years pass.

The chief executive of MGM Advantage, a company of pensions experts, Chris Evans, said that these predictions help to emphasise the importance of planning for old age. Thanks to medical technology and generally healthier lifestyle choices, people who retire today can expect to live some 20 more years.

The quality of those 20 years will depend upon the choices people make when saving for their “golden years”.

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