Is the statutory minimum 5%+3% enough?

Cobbler_tone

OldScientist said:

Albermarle said:

 Someone aiming to achieve the ‘Comfortable’ retirement living standard will need to save more than double what they’d need to save if aiming for ‘moderate."

So you need to save 52% of your income to get a comfortable retirement? That seems somewhat OTT.

For someone on average earnings (i.e., about £35k) the answer is yes (and remember 'comfortable' in PLSA living standards terms* is £43k per year for a single retiree and £59k for a couple). In other words, for those on average earnings, even meeting the 'moderate' standard (31k and 43k single and couple) would require a saving rate of 26%.

* I know there have been discussions on these boards in the past about the PLSA retirements nomenclature - IMO, minimum and moderate are probably OK as terms, but 'comfortable' is not since the antonym (i.e., 'uncomfortable' doesn't describe retirement for those on lower incomes).

The trouble is with averages are that they are just that.
So I am assuming the £59k is gross for a couple? If you did a straw poll on here I am sure the majority of posters either live, or know people who live a comfortable existence on far, far less than that.

Must come down to the definition of 'comfortable or moderate'. That will be post state pension age too, so a safe assumption that the majority will have a more simple lifestyle and be mortgage free by then.

The range of what is needed to be 'comfortable' is huge and for a couple must range from £30k - who knows what. I would hope intelligent people would read articles like this and not panic thinking that they need more than they may live on now.
I would deem my elderly parents extremely comfortable, probably bring in £35k between them, save most of it and god knows how much cash in the bank!
It's all relative.

LHW99

It's all relative.

Definately this. At one time, I seem to remember that (with at least some DB pensions) the maximum the scheme allowed / expected people to reach was something like 2/3 of their working salary. Consequently, if you earned less, you would expect to receive less, but it would be unlikely to affect your existing standard of living much when your income dropped, as you would have fewer expenses.

It is probably still true as a generality - if you have been used to living on an income of <£30k, then you will probably manage relatively comfortably on £20-£25k. The problem may be for those who have a £60k+ lifestyle, mortgages running till beyond SPA and who have made only minimum contributions (or heaven forfend opted out of autoenrollment!)

Nebulous2

Cobbler_tone said:

OldScientist said:

Albermarle said:

 Someone aiming to achieve the ‘Comfortable’ retirement living standard will need to save more than double what they’d need to save if aiming for ‘moderate."

So you need to save 52% of your income to get a comfortable retirement? That seems somewhat OTT.

For someone on average earnings (i.e., about £35k) the answer is yes (and remember 'comfortable' in PLSA living standards terms* is £43k per year for a single retiree and £59k for a couple). In other words, for those on average earnings, even meeting the 'moderate' standard (31k and 43k single and couple) would require a saving rate of 26%.

* I know there have been discussions on these boards in the past about the PLSA retirements nomenclature - IMO, minimum and moderate are probably OK as terms, but 'comfortable' is not since the antonym (i.e., 'uncomfortable' doesn't describe retirement for those on lower incomes).

The trouble is with averages are that they are just that.
So I am assuming the £59k is gross for a couple? If you did a straw poll on here I am sure the majority of posters either live, or know people who live a comfortable existence on far, far less than that.

Must come down to the definition of 'comfortable or moderate'. That will be post state pension age too, so a safe assumption that the majority will have a more simple lifestyle and be mortgage free by then.

The range of what is needed to be 'comfortable' is huge and for a couple must range from £30k - who knows what. I would hope intelligent people would read articles like this and not panic thinking that they need more than they may live on now.
I would deem my elderly parents extremely comfortable, probably bring in £35k between them, save most of it and god knows how much cash in the bank!
It's all relative.

We've had a lot of discussion about PLSA standards in the past, particularly the last revision, where they jumped substantially and most people here concluded they had become detached from reality. 

They are net figures - they reference expenditure, not income. 

The first page here gives a summary of what they see each level as paying for. 

Home - PLSA - Retirement Living Standards  

We are all different however, the more detail they provide on what a comfortable couple would spend on clothes for instance, the easier it becomes to pick holes in it. 

The biggest issue for me is probably vehicles. In that last revision they dropped the comfortable couple to a single small three year-old car. I'm in a fairly rural area, and many of the retired people I see are driving premium vehicles. Jags, Mercs, Land rovers. There are also a lot of mainstream models, but few of them small, other than those driven by older single women.  

The standards are set by interviewing people. The last revision was done while fuel was expensive, insurance was going up, and secondhand cars were sometimes more expensive than new ones. I think people were indicating an intention to drop to one small car, rather than actually doing it. 

ali_bear

In setting the statutory minimum contribution level they had to balance the need to be making meaningful pension contributions with the significant cost-of-living pressure on incomes. So it is going to be a fudge. What it does mean, with auto enrollment, is that many working people in their 20's and 30's will be making at least some private pension contributions when otherwise they would never have thought of it. 

Cobbler_tone

Nebulous2 said:

Cobbler_tone said:

OldScientist said:

Albermarle said:

 Someone aiming to achieve the ‘Comfortable’ retirement living standard will need to save more than double what they’d need to save if aiming for ‘moderate."

So you need to save 52% of your income to get a comfortable retirement? That seems somewhat OTT.

For someone on average earnings (i.e., about £35k) the answer is yes (and remember 'comfortable' in PLSA living standards terms* is £43k per year for a single retiree and £59k for a couple). In other words, for those on average earnings, even meeting the 'moderate' standard (31k and 43k single and couple) would require a saving rate of 26%.

* I know there have been discussions on these boards in the past about the PLSA retirements nomenclature - IMO, minimum and moderate are probably OK as terms, but 'comfortable' is not since the antonym (i.e., 'uncomfortable' doesn't describe retirement for those on lower incomes).

The trouble is with averages are that they are just that.
So I am assuming the £59k is gross for a couple? If you did a straw poll on here I am sure the majority of posters either live, or know people who live a comfortable existence on far, far less than that.

Must come down to the definition of 'comfortable or moderate'. That will be post state pension age too, so a safe assumption that the majority will have a more simple lifestyle and be mortgage free by then.

The range of what is needed to be 'comfortable' is huge and for a couple must range from £30k - who knows what. I would hope intelligent people would read articles like this and not panic thinking that they need more than they may live on now.
I would deem my elderly parents extremely comfortable, probably bring in £35k between them, save most of it and god knows how much cash in the bank!
It's all relative.

We've had a lot of discussion about PLSA standards in the past, particularly the last revision, where they jumped substantially and most people here concluded they had become detached from reality. 

They are net figures - they reference expenditure, not income. 

The first page here gives a summary of what they see each level as paying for. 

Home - PLSA - Retirement Living Standards  

£59k net. Interesting reading but it is pretty worthless info, unless you haven't got the ability to build the most simple of spreadsheets, or do it on a fag packet.
We earn £120k a year gross, about £72k net after tax, pensions etc. We save a fair bit. 3 holidays, mini breaks, run two cars. 
We will go down to one (nice) car and the biggest debate is whether to fund private healthcare (which we will lose post work) or just self fund as needed.

As it says it is expenditure and not income, it isn't related directly to pensions in isolation.
Our plan is to retire early with a net income of £40k a year (increases a bit more at state pension post bridge) and three/four years worth in the bank or drawdown. That is building in depreciation on the car and a couple of decent holidays and some UK breaks, plus most of the shopping in Waitrose...the only true definition of 'comfortable'   
Maybe that is par for the course but that challenge of accumulation to decumulation is real!! 

I guess on the plus side it makes people think about what they may need in retirement, although again, you'd think most are intelligent enough to know what they realistically need in line with their situation and lifestyle. If awareness was needed there is probably a better way of doing it IMO.

vacheron

I find the PLSA figures equally confusing in that "comfortable" is a relative term in the same way that "poverty" is a relative term.

I also feel that sometimes normal people will read these figures, and the pension funds required to achieve them, and consider them so far removed from their current situation that they may just give up altogether.

I also know a huge amount of couples who are living very "comfortably" on less than £59k per year at an age where mortgages and childcare are taking up a large amount of their income, however the are being told to live on a significant amount less (or "uncomfortably" by definition of the PLSA figures) for their entire working career in order to be able to save sufficient to live "comfortably" on the full £59k when they retire when they most likely have a fully paid off mortgage and no childcare costs? 🤷‍♂️

It reminded me a lot of those articles which you used to read in The Times etc. that talk about the full cost of raising a child to 16 which, which sounds crazily high until you start reading things like "nanny costs", "school fees" and "private nursery from six weeks old"! 

NoMore

The problem with the plsa is they interview people on what the think they require in retirement. I would be not be surprised if they do it not by figures but by asking how often do they think they would need a new car/kitchen/holidays etc and the people replying aren’t actually totalling the cost. It’s aspirational rather than based on actuality. 

Triumph13

The problem with the plsa is that they clearly think the great majority of the working population are living in poverty.  Or they just don't think.

westv

NoMore said:

The problem with the plsa is they interview people on what the think they require in retirement. I would be not be surprised if they do it not by figures but by asking how often do they think they would need a new car/kitchen/holidays etc and the people replying aren’t actually totalling the cost. It’s aspirational rather than based on actuality. 

There are full breakdowns available on what exactly the money is spent on - not sure if the spreadsheets are up to date or not though.

SarahB16

A problem is whether you need to rent privately in retirement. 

Perhaps a person never got on to the property ladder perhaps he or she is divorced and then cannot afford to buy on their own. 

Many assumptions suggest that you have paid off your mortgage in retirement but for an increasing number of people they are having to continue to rent privately when in retirement which will obviously take up a significant amount of a person's pension.