Name: The £3m pension pot.
Age: We’re talking about people in their 20s.
Gen Z, then? Correct. And you can rhyme them with “bed” or “bee”, as you please.
Thank you. What about them? Let’s say these young workers are going to retire aged 65.
Quite early (unless they’re French), but OK. Rathbones, an investment management company, has estimated that a 25-year-old today who wants to live “comfortably” for a quarter of a century after retirement will need a pension pot of £3.1m. For a two-person household, the figure is £4.3m.
We must be talking about private pensions, because there’s not a lot of comfort in a state pension. Correct.
That is an eye-watering amount of money. It’s all down to inflation. Rathbones came up with the figure by assuming 2% annual inflation and contributions increasing by the same percentage, while the pot grows at an average of 5%.
So how much would they have to save to achieve that? Roughly £1,600 a month for a single person.
Yeah, good luck with that if you’re a nurse, a teacher – or anything, really, apart from a hedge-fund manager. Also, when you’re 25 you should be having a good time, not thinking about your pension. You could always rethink your retirement plans.
I’m trying not to think about retirement! But go on. The analysis found that gen Zs will need £2.2m for a “moderate” lifestyle and £947,700 for a “minimum” one.
What about if you’re a bit further along the conveyor belt of life? In your 30s, say, or your 50s? It’s complicated, and there are so many variables – not just about your current salary and what sort of lifestyle you’re planning, but also how you plan to take your pension, if you’re going to buy an annuity or use drawdown …
OK, don’t get too technical on me. Ballpark? Pension companies generally agree that a reasonable target is having three times your salary in your pot by your 30s, and six times your salary by your 50s.
And say I’m 65 now, shaking that pot – how much am I hoping is in there? Well, returning to the original Rathbones analysis, they estimate that for a comfortable 25-year retirement you need £1.4m.
What does a comfortable retirement today even look like? Annual overseas holidays plus long weekends away in the UK, some luxury, eating out and “some spontaneity”.
Like getting a yacht? I’m one of the have-nots, not the have-yachts.
Do say: “Yes, hello, is that the Bank of Mum and Dad?”
Don’t say: “No, not in the piggy bank. Could you put this week’s pocket money in my private pension plan?”
