Pension saving is undoubtedly a challenging endeavour, and one which may take a significant amount of time to achieve. While retirement income can come from many different places, building up suitable funds will be important, especially with a constant stream of income from a salary or wages removed in later life. As a result, Britons are being urged to take pre-emptive action, as soon as possible, to ensure they are amply prepared.
However, planning ahead often means looking at calculations, which Britons may favour undertaking themselves or outsourcing.
Regardless of the method, looking at finances ahead of time will be particularly important to ground oneself in the reality of financial responsibilities.
Ms Savova added: “As a rule of thumb, I tend to divide the amount you need by four percent, which is not the easiest mathematical calculation.
“However, it does tell you that roughly you need a pension pot of £500,000 if you’re going for that, and that, in and of itself, is a huge amount to have saved.”
She urged individuals to take action ahead of time, rather than at the moment of retirement to ensure they have enough to see them through their later years.
But when thinking about this time in one’s life, and making these calculations, there is a process which is worth following.
As Ms Savova explained: “You need to work out what is the total pound pension pot that you need to have saved at the point of retirement.
“This will enable you to then calculate roughly how much that will give you for the rest of your life.
“Assuming the standard retirement age is 65, if you want to retire early, you’re going to need more, but let’s assume it’s 65.
“You’ll need to work out the total pound amount, and a rough assumption is that you’ll be able to take four percent of that out every year through a pension product.
“That will kind of tell you how much you have and whether you can afford to do what you want to do in retirement.”
While Ms Savova acknowledged her calculations are based on Britons solely deriving a retirement income from a pension pot, she also stated there are various other sources of income.
Of course, of particular importance to Britons will be the state pension payments they receive each year, which can vary according to National Insurance contributions.
But also, for those retiring overseas in certain countries, the state pension will be frozen, meaning expats will not be able to benefit from annual rises.
It is issues such as these which Ms Savova stated should be taken into consideration.
In so doing, individuals will be able to break down their budget themselves and plan for the next 20 to 30 years and potentially beyond, in retirement.
Finally, Ms Savova concluded by stressing it is always important to have goals in mind when working towards retirement.
As saving is both an “emotional” and “monetary” exercise, striking the right balance through forward-planning will be key.