Am I saving enough?
Putting off saving could cost you more later.
Sometimes it helps to know what you’re aiming for when you save for a pension and FuturePlanner has several tools to help with this.
A common way of thinking about your savings target is the ‘replacement ratio’, which is the proportion of your salary you would need as an income in retirement. The tables below have been prepared by our advisers at Schroders to illustrate the level of contributions you might need to pay in order to achieve a target income. They also show the importance of starting to save as soon as you can, rather than leaving it until later.
Employee contribution required
30% of income:2%
40% of income:3%
50% of income:4%
60% of income:5%
30% of income:6%
40% of income:9%
50% of income:11%
60% of income:12%
30% of income:8%
40% of income:12%
50% of income:15%
60% of income:17%
30% of income:2%
40% of income:3%
50% of income:5%
60% of income:7%
30% of income:6%
40% of income:9%
50% of income:12%
60% of income:14%
30% of income: 8%
40% of income: 12%
50% of income: 17%
60% of income: 21%
30% of income: 3%
40% of income: 4%
50% of income: 7%
60% of income: 9%
30% of income: 9%
40% of income: 11%
50% of income: 14%
60% of income: 15%
30% of income: 12%
40% of income: 15%
50% of income: 21%
60% of income: 24%
30% of income: 4%
40% of income: 7%
50% of income: 10%
60% of income: 15%
30% of income: 11%
40% of income: 14%
50% of income: 15%
60% of income: 15%
30% of income: 15%
40% of income: 21%
50% of income: 25%
60% of income: 30%
For most people, the State pension will be an important part of their saving plans. The age that the State pension is payable depends broadly on your date of birth but it is usually between age 65 and 68. You can check your State pension age here.
The Pensions and Lifetime Savings Association (PLSA) has worked with Loughborough University to produce a report which aims to help people understand how much they will need for a minimum, moderate or comfortable quality of life when they retire. For more information go to https://www.retirementlivingstandards.org.uk/.
To see how much your current contributions may give you, go to your own retirement account MyPension.com and use the calculator.
| Starting salary of member (currently aged 30): |
£20,000 |
£30,000 |
£40,000 |
£50,000 |
| Percentage of salary represented by State pension at age 68: |
25% |
16% |
12% |
10% |
These figures have been produced by Schroders to assist FuturePlanner with its communications. The figures show the benefit of starting to save earlier towards retirement. For employees who start to save at younger ages, lower contribution rates are expected to be required in order to target the same percentage of salary as pension at retirement.
The figures are based on the following assumptions:
- The member has a salary of £30,000 when they start saving. Their salary increases at a rate of 3.5% each year until retirement at age 68.
- The member is assumed to continue to contribute at the same rate from the age at which they start saving through to age 68.
- The employer pays contributions greater than the member's contributions, up to a maximum of 15% of salary each year.
- Funds grow in line with the target investment returns of the default strategy each year. This varies as members approach retirement with investment returns expected to be higher when members are younger. Actual investment returns may be higher or lower than this, and will also depend on how the member's fund is invested.
- Investment charges applied to the member’s fund are applied in line with those charged for the default investment strategy. The growth figures above are shown net of these fees. Actual investment charges will depend on how the member's fund is invested and may differ from this. The pattern of investment returns also has an important influence on the accumulated fund.
- At retirement, the member uses their fund to purchase a single non-escalating annuity rate to receive an income equal to the replacement rate shown, from retirement to life expectancy age. These withdrawals do not increase over time.
- The member is assumed to be male and retire at age 65.
- The pension does not increase while it is in payment.
- On the member's death, their spouse will not receive any pension.
- There is no lump sum payable on the death of the member to their spouse if they die within five years of retirement.
- The calculation excludes any state pension benefits.