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The Independent
a day ago
- Business
- The Independent
How much you should save in your 20s for a ‘comfortable' retirement
Research indicates that individuals in their 20s need to save nearly £500 monthly to achieve a comfortable retirement, with this amount increasing significantly with age. A comfortable retirement is defined by the Pensions and Lifetime Savings Association (PLSA) as an annual income of £43,900 for a single person, allowing for financial freedom and luxuries. To reach this comfortable retirement by age 65, a target pension pot of £700,000 is considered ideal. Retirement income can be managed through annuities, which provide a lifelong income, or drawdown options, where the pot remains invested with income drawn from it. Experts recommend saving multiples of one's salary at different life stages, aiming for one times salary by age 30 and six times by age 60, though many currently fall short of these targets.
Telegraph
a day ago
- Business
- Telegraph
Where to retire to escape high-tax Britain
Gone are the days when British pensioners were given an easy ride on tax. Labour's continued freeze on income tax thresholds means a growing chunk of retirees' income is clawed back by the state each year. The state pension is on course to exceed the tax-free 'personal allowance' threshold by 2027 – a phenomenon dubbed the 'retirement tax'. To achieve a 'comfortable' standard of living in retirement today, a single pensioner needs an income of £52,220 a year, according to the Pensions and Lifetime Savings Association (PLSA). This would tip them into the punitive 40p 'higher rate' bracket and rack up an income tax bill of £8,320 – effectively handing over 16pc of their income to tax. But any retirees considering moving abroad for their golden years will find a plethora of low-tax regimes ready to welcome them – without demanding a big slice of their pension in return. Here are four highly desirable destinations where you could slash your retirement tax bill. Greece has devised a preferential tax regime for expats with foreign pensions and investment income as it aims to attract high-net-worth retirees. The country offers a flat 7pc rate of income tax on foreign-sourced income – including pensions – for up to 15 years. You must fulfil certain conditions to be eligible, including staying in Greece for more than 183 days each year, and not having been a tax resident in Greece for five of the last six years prior to arrival. You must also move from a country with which Greece has a double taxation treaty – which includes Britain. Greece's 'golden visa scheme' allows expats to gain residence in exchange for investing in real estate. The Greek government has raised the minimum property value to €800,000 (£684,000) in popular areas such as Rhodes, Kos and Santorini, in an effort to deal with housing affordability for locals. But it is still possible to get the same visa for a smaller investment if you look for homes in less in-demand areas such as the Peloponnese or mainland Greece. Purchasing a property for €400,000 or more is enough to secure you a golden visa. The threshold falls to €250,000 if you convert a commercial building into a residence anywhere in the country, or restore or reconstruct a listed property. The simplest way to become a Cypriot tax resident is to spend more than 183 days a year in the country. Once you are a tax resident, your British state pension, occupational and personal pensions, and annuities will be subject to income tax in Cyprus. The only exception is income from government service pensions, paid to retired members of the fire service, police, civil servants, armed forces and local authorities, which remains subject to British tax. Pension income can be taxed in one of two ways. Cyprus offers a very low 5pc flat rate of income tax on foreign pension income above a tax-free allowance of €3,420. Or you can choose the standard Cypriot income tax system each year, with the first €19,500 exempt. A pensioner on a 'comfortable' retirement income of £52,220 (€61,110) would be better off opting for the 5pc rate. By contrast, anyone with an income below around £21,400 (€25,000) would be better off under the standard Cypriot system. Non-domiciled residents of Cyprus are also exempt from tax on dividends and interest, there are no inheritance, wealth or gift taxes and there is no capital gains tax on property sold outside the island. Expat retirees moving to Italy can benefit from an attractive 7pc flat rate of income tax – but only if they move to certain underpopulated areas. The southern regions of Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sicily and Sardinia offer the rate on foreign income – including pensions – for anyone who becomes a resident in municipalities with fewer than 20,000 inhabitants. While your pension or other sources of non-Italian income will be taxed at 7pc, you will still need to obtain a visa to move there if you are not an EU citizen. The preferential rate lasts 10 years, and to qualify, you must have been a tax resident outside Italy for at least the previous five years. For non-working retirees, the 'elective residency visa' is a popular choice. To qualify, you will need to prove you have an annual income of at least €31,000 for an individual or €38,000 for couples, plus 20pc for every additional dependent, or 5pc for a dependent child. In Britain, anyone over the age of 55 can take 25pc of their pension as a tax-free lump sum. But in foreign tax regimes, including Italy's, this withdrawal will be taxable. David Denton, of investment manager Quilter Cheviot, said: 'Retirees should consider taking their pension lump sum before leaving the UK, as this feature is typically unavailable abroad. This benefit could effectively be lost if not accessed beforehand.' The UAE's low-tax regime has turned it into one of the top destinations for wealthy British expats, with the tax perks on offer extending to pensioners. There is zero income tax in the UAE, which comprises Dubai, Abu Dhabi and five other emirates. And if you spend at least 183 days in a year there, there are no UAE taxes on your assets outside the country. The Dubai 'retirement visa' offers a renewable five-year residency for all expats aged 55 and over who meet either an income or property ownership requirement. Applicants need a minimum yearly income of AED240,000 (£48,600) – or AED180,000 in Dubai. Alternatively, they can buy a property (or properties) in the UAE with a total value of at least AED1m, or hold this amount in savings in a UAE bank account. Levies, including income tax, capital gains tax and inheritance tax are non-existent in the UAE, but other requirements act as taxes by proxy. Mr Denton said: 'Low-tax environments, such as the UAE, can come with hidden costs – mandatory health insurance being a prime example – effectively functioning as indirect taxation.' Another point to consider is that you will not receive the annual 'triple lock' uplift on your state pension if you move to the UAE. Britain does not have a 'reciprocal agreement' in place with the Emirate, meaning your state pension will be frozen at its current level on the day you leave Britain.
The Independent
a day ago
- Business
- The Independent
Revealed: The exact amount every generation needs to save for a comfortable retirement
The surprising amount a person needs to save in each decade of their life for a ' comfortable retirement ' has been revealed. Someone aged in their 20stoday needs to start saving nearly £500 a month, research from investment management company Fidelity shows, with this figure rising significantly every ten years. Assuming a starting point of no savings, a 35-year old should start putting away £841 a month, the research shows. This rises to £1,703 at 45 and £4,508 at 55. These are the amounts that would be needed to hit a 'comfortable' retirement salary which the Pensions and Lifetime Savings Association (PLSA) puts at £43,900 a year for a single person. This rises to £60,600 for a couple (meaning £30,300 each). It's important to note that the PLSA's comfortable category is defined as giving a pensioner 'financial freedom and some luxuries.' In this bracket, a pensioner is able to go on a few holidays a year, eat out regularly, and keep money aside for household maintenance. The next bracket down from this is 'moderate', where a pensioner has 'financial security and flexibility,' followed by the bracket where at least all the basic needs are covered and some may be left over for leisure. Assuming a retirement age of 65 – which will continue to rise – this means a pension pot target of £700,000 is ideal to fall into the comfortable retirement category. This depends on a variety of factors however, especially if the pension saver goes down the annuity route. An annuity is a financial product that provides a lifelong, regular income in exchange for a down payment of savings. For a one person, the PLSA says a fund of around £540,000 to £800,000 is ideal to return a comfortable annual payment. From age 55 (rising to 57 in 2028), savers can still take 25 per cent of their pension as a tax-free lump sum. This can be done before purchasing an annuity, meaning it can be drawn from that alongside those payments to make up and annual income. The other most popular pension route is the drawdown option. This involves keeping some or all of the pension pot invested while taking a regular income from it. However, the longevity of this pension pot will depend on its investment performance. A poor investment performance could see £700,000 run out by age 83 when also taking an income of around £40,000. However, an average performance could make it last until age 90, while a good performance could carry the funds far past 100. Further research from Fidelity also shines a light on how much a person should look to have saved at each point in life to achieve a decent retirement income. By 30, experts recommend an amount in savings worth one times your salary. So for someone earning £30,000, this would mean at least £30,000 in savings – both inside and outside of pensions. However, the average person is currently just falling short of this target. Latest figures show that in the 25-34 age bracket, an average £28,277 is held in savings – with around £9,500 in ISAs and £18,800 in pensions. By 40, the guidance rises to twice your salary at that age, and by 50 it's three times as much. This rises to six times your salary at 60 – a target that many will struggle to reach. Government figures show that in the 55-64 age bracket, an average of £178,745 is held in savings. This comprises around £41,000 in ISAs and £137,800 in pensions.
Yahoo
13-06-2025
- Business
- Yahoo
How far will your pension go as retirement costs soar?
The cost of retirement continues to creep up, with the Pensions and Lifetime Savings Association (PLSA) recently putting the cost of a moderate retirement at £31,700 per year for a single person and £43,900 per year for a couple. This includes the state pension, but shows how much heavy lifting our workplace or personal pensions need to do to fill the gap. This is hardly going to buy you a luxury lifestyle either – a moderate lifestyle covers all your basics, plus some nice extras such as two weeks in Europe a year and the ability to run a car. If you want something more luxurious, this data shows your pension is going to need to work much harder: a comfortable lifestyle is said to cost £43,900 per year for a single person and £60,600 for a couple. Read more: What is the Pension Investment Review? Before you throw your hands up in despair, it's fair to say that while these figures provide a useful rule of thumb, they aren't hard and fast. Our own data from the HL Savings and Resilience Barometer put the costs slightly lower. A moderate retirement for a single person was pegged at £26,129 per year and a comfortable retirement at £41,829. The key thing is to think about what retirement means for you – is it lots of travelling or something more sedate? You may find that what you need differs massively from these figures. Once you've got an idea of what you want, you can start to put a figure on what that might cost. It's important to factor in all costs. The PLSA data assumes you own your home in retirement, and this is no longer the case for many people. So, if this is you, you will also need to factor mortgage or rental costs into your plan. You can then use online calculators to see if what you've got in your pension will get you where you need to be. Putting your data in an online calculator can show you what you are on track for in retirement. This will either give you the confidence of knowing you've got enough, or the time to put a plan in place if you haven't. Read more: Should people keep working until later in life? They can even be used to model the impact of boosting your contributions over time, so you can see how much small changes can help you move towards your retirement goal. Boosting contributions every time you get a pay rise can also make a big difference and it's also worth checking to see if your employer is willing to increase their contributions if you increase yours. This is known as an employer match and can play a big part in boosting your pension. The data shows that coupled up retirees have a slightly easier time of things than their single friends. This is because they share a lot of costs and will have the benefit of two state pensions and two workplace or personal pensions. This is a big help, but it's important not to rely too heavily on a partner's pension to see you through retirement. Relationships may not last and there's a worry that you could find yourself approaching retirement with very little. It's always important to make your own provision – even if you stay together having your own income will give you more control over how you spend your money in retirement. Read more: How getting ahead on your tax return can help cut your tax bill Why it's important to plan for retirement with your partner How to plan for retirement and track your pension pot incomeSign in to access your portfolio
Scottish Sun
10-06-2025
- Business
- Scottish Sun
Urgent retirement warning for anyone on average £35k salary – do you need to act?
Plus, find out what the Government is expected to do with pensions as part of a huge shake-up POT LUCK Urgent retirement warning for anyone on average £35k salary – do you need to act? Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) BRITS could end up having £700,000 less in their pension pots than they need for a comfortable retirement, analysis shows. The shocking figures reveal a worker on an average salary of £35,000 starting out today would need a pension pot of nearly £1.2million in 40 years' time to be able to retire comfortably. Sign up for Scottish Sun newsletter Sign up 1 A worker on an average salary will have £740,000 less than needed in their pension pot Credit: Alamy That's according to the Pensions and Lifetime Savings Association (PLSA). But recent Government figures showed the current minimum level of pension contributions for private sector workers would leave employees with £460,000 at retirement. That's a whopping £740,000 lower than the amount the PLSA says is needed to retire comfortably. Workers are automatically enrolled by their employers to make pension contributions, with the minimum level set at 8% of qualifying earnings. The employer will contribute 3% while the employee covers the remaining 5%. Last year, the PLSA estimated the average Brit would have a shortfall of £640,000 in their pension pot by retirement. But there has been an increase in the estimated cost of affording a comfortable retirement, so workers will now need an extra £100,000. The PLSA says a single person who owns their own home will need an annual post-tax income of £43,900 for a comfortable retirement this year. That's up from £32,800 in 2020. A "comfortable" retirement according to the PLSA includes £150 a week to spend on groceries and meals out, £1,500 a year for clothing and footwear, and an annual fortnight-long four-star holiday in the Mediterranean. What are the different types of pensions? For a more modest standard of living, the same worker would need a pension pot of £729,000. Experts now fear the UK is facing a pensions savings crisis as the minimum contribution level isn't enough to fund retirement properly. If pension contributions were upped to 12%, the average £35,000 earner would have £691,977 in their pension pot by retirement - still a shortfall of hundreds of thousands of pounds. A £50,000 earner would have a pension pot of £658,367 by retirement if they contributed the minimum 8%. If they upped it to 12%, they would have £988,524. How is the Government reforming pensions? The Government is broadly expected to consider its auto-enrolment rules in the next stage of its Pensions Investment Review. Chancellor Rachel Reeves has previously considering copying aspects of Australia's pension contribution system, which forces employers to pay more into employees' pots. But this could prove difficult as businesses have already faced increased costs as they're contributing more National Insurance for employees and the minimum wage has risen too. The Government is currently planning some of the biggest pension reforms in decades. It earlier announced plans to move billions of pounds of pension savings into larger "megafunds". The scheme is aimed at boosting savers' retirement pots as well as investment in the UK. Data from the final report of the Pensions Investment Review showed the move should boost the average earner's pension pot by £6,000 by the time they retire. This is based on the average earner who begins saving at 22 and continues to do so until they reach state pension age.
