Sad old manWe all exist in a state of denial about retirement. It's not that we don't realise it's going to happen at some point, we just can't ever imagine being able to afford to retire and nobody likes the idea of living in poverty or working until we drop.

However, there are some alarming statistics that should serve as a wake-up call to us all.

Penions Tools & Tips

Retirement Tips & Tools


The investment company Fidelity has put together some truly alarming facts and figures.

1. If you want to live on the equivalent of £10,000 a year (hardly a fortune) you'll need an incredible £334,000 at retirement (assuming that happens in roughly 20 years' time).

2. To achieve a retirement pot of £334,000 in 20 years time you will need to save £750 a month over that period if you achieve a growth rate in your savings of 5% a year. If you have 30 years to retirement, however, you only need to save £375 a month, and if you have 40 years you can put aside just £200.... which is still a fair chunk of cash.

Penions Tools & Tips

Retirement Tips & Tools



3. Your employer isn't going to help much. The average they pay into a final salary pension scheme is 23.2% of salary. However, the average they pay into a defined contribution scheme (which is something like a stakeholder) is less than 6.7% of salary.

4. If you need to speed up the process, think about the kinds of investments you make. How much you end up with at the end of your working life depends on three things: how much you save, when you start saving and the rate of growth you achieve on your savings. Look for the best returns you can achieve for an acceptable level of risk and keep your costs low.

5. At the end of the process, shop around for an annuity. Sixty-eight per cent of people buying an annuity stick with the company they have been saving with. The difference between the income available on even the top five "best buy" rates on comparison websites can be around 10% so for many retirees the wrong choice can cost thousands of pounds a year in lost income.


6. Only 23% of final salary pensions in the private sector remain open to new members, compared to almost all public sector workers who have the opportunity to join a final salary scheme. We can moan about how unfair this is or we can accept the reality and make the best of it.

The key to all of this is to know where you stand. Appreciate what you need to save, for how long, and what kind of a return you need on your money.

Account for inflation
Start at the end of the process and work out what you will need to live on and when - don't forget to account for likely inflation Then work back to how much you will need in order to buy an annuity to give you that income (There are loads of annuity calculators out there including this one). Then work out how much you need to save each year, and how much you need to make from those investments in order to hit your target (you may need some advice for this one but you can start with a savings calculator like this one).

The initial figures may seem terrifying. However, even if there's no way you can afford to invest what you need to, you should start putting away everything you can afford, and bear in mind that you need to find a way of making up the shortfall - whether that's through saving more as your income rises, factoring in an inheritance, or considering part time work in retirement.

There are no easy answers, but we need to be asking the questions. If we ignore this one it won't go away, it will come back to haunt us in retirement.

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