It’s in the best interests of UK expats abroad to ensure they have enough money in their pension pots to secure a comfortable retirement for themselves and their families. However, over the last year, we have seen inflation soar far above the Bank of England’s 2% target, which means the amount needed for a comfortable retirement is changing.
So, how much do you actually need?
In 2023, people in retirement now need to spend far more to maintain their standard of living, and those saving for retirement will need larger pension pots to achieve their retirement goals.
A report from the Pensions and Lifetime Savings Association stated that the annual amount needed for a single person to enjoy a comfortable retirement would be £26,700, after tax and not including state pension benefits. A comfortable retirement was defined as being able to fund three weeks’ holiday in Europe, have a £144 weekly food budget and spend £56 on birthday presents.
To achieve this at the age of 66, based on current life expectancies and annuity rates, you would need at least £645,000. For a couple, this amount increases to almost £800,000.
The report was based on the assumption that people would not be paying rent or a mortgage and did not factor in any cost associated with needing care if you suffer from ill health.
According to the report, the cost of the minimum standard has increased over the last year by 18%, up from £10,900 to £12,800. This is the amount required to cover basic needs and live with dignity.
So, what does this mean for you?
It is important to note that the above figures are based on annuities. Many people may opt to draw directly from their pension rather than buying an annuity, which may be a better option for them. If you choose to take this approach, then you will need to manage your investments and risks carefully to make sure your pot value is not affected significantly by volatile markets.
Making sure you have a plan in place is the best way to ensure you meet your retirement goals, and the sooner planning begins, the better. Speak to one of our advisors to find out how our low cost portfolios can help you.