Retirees need additional £90k in pension savings

RNS Number : 3945W

PensionBee Group plc

18 August 2022

 

PensionBee Group plc

Retirees may need an additional £90,000 in pension savings due to soaring inflation

London, 18 August 2022: New financial modelling from leading online pension provider, PensionBee , reveals that due to high and persistent rates of inflation the average retiree may need an additional £90,000 in pension saving during periods of medium market performance (5% annual growth) to maintain a comfortable lifestyle over a 20-year retirement.

For individuals looking to enjoy a more luxurious retirement, PensionBee's modelling suggests that these savers may need to put aside an additional £140,000 during periods of medium market performance. In 2021, the average retiree required an annual income of around £19,000 to maintain a comfortable lifestyle, which translates to an overall pot size of £330,000, assuming a 5% annual growth rate and 0.5% fees (1) .

PensionBee's inflation model assumes 10% inflation in 2022 and 2023, 5% inflation for the five years after that, and 2.5% for the following thirteen years with:

a)  medium market performance assumed as 5% growth per year

b)  high market performance assumed as 7% growth per year

Periods of high market performance (7% annual growth) help mitigate the impact of inflation, as the additional savings required to maintain a comfortable lifestyle over a 20-year retirement decreases to £10,000. In 2021, the average retiree required an annual income of around £31,000 to maintain a luxurious lifestyle, which translates to pots of £540,000, assuming a 5% annual growth rate, and 0.5% fees (2) .

As inflation stands at 10% (3) , eligible pension savers may need to increase their withdrawal amounts by £2,000 (to £21,000 in 2022) to maintain a comfortable retirement and £3,000 (to £34,000) to preserve a luxurious lifestyle in 2022.

Romi Savova, CEO of PensionBee, commented: "Our latest modelling highlights the real impact of yesterday's record inflation levels on pension savers, particularly for those who may already be withdrawing from their pension.

Despite the alarming numbers, we want to reassure savers that it's possible to increase the value of their pension by following a few simple steps, without needing to increase their contributions at a time when finances are already tight.

I would encourage pension savers to:

1.  Hunt down and consolidate any old pension pots, where it makes sense to do so, in order to avoid losing track of hard-earned savings.

2.  Investigate the fees associated with their pension, as significant fees can erode the value of a pot over time. Even a 1% fee saving can make a big difference to an overall pot size in retirement.

3. Keep savings invested for as long as possible, only withdrawing when absolutely necessary, to give a pension as much time to grow.

4. Consider a cautious withdrawal approach when accessing any pension savings. Our research shows that most savers are prudent with regards to pension withdrawals and seek to optimise the lifetime of their pension pots."

(1)  'How much will you need to retire?', Which?

(2)  Ibid

(3)  ' Consumer price inflation, UK: July 2022', ONS

Appendix:

Table 1: Additional pension savings required, given high and persistent rates of inflation, at medium market performance, over a 20-year period

	Overall pot size required in 2021	Additional savings required with medium market performance	Overall pot size required in 2022
Comfortable lifestyle	£330,000	£90,000	£420,000
Luxurious lifestyle	£540,000	£140,000	£680,000

Source: PensionBee, August 2022. Medium market performance is defined as 5% annual growth. The model assumes 10% inflation in 2022 and 2023, 5% inflation for five years after that and 2.5% for the following thirteen years, with 0.5% annual management fees. Rounded to the nearest ten thousand pounds.

Table 2: Additional pension savings required, given high and persistent rates of inflation, at high market performance, over a 20-year period

	Overall pot size required in 2021	Additional savings required with high market performance	Overall pot size required in 2022
Comfortable lifestyle	£330,000	£10,000	£340,000
Luxurious lifestyle	£540,000	£20,000	£560,000

Source: PensionBee, August 2022. High market performance as 7% annual growth. The model assumes 10% inflation in 2022 and 2023, 5% inflation for five years after that and 2.5% for the following thirteen years, with 0.5% annual management fees. Rounded to the nearest ten thousand pounds.

Table 3: Withdrawals required in 2022 and 2023 due to 10% inflation

	2021	2022	2023
Comfortable lifestyle	£19,000	£21,000	£23,000
Luxurious lifestyle	£31,000	£34,000	£38,000

Source: PensionBee, August 2022. 2021 figures are based on Which? data. Rounded to the nearest thousand pounds.

Contact details

PensionBee

Rachael Oku / Laura Dunn-Sims / Ffion White

[e-mail]

dd: 020 3859 5788

About PensionBee

PensionBee is a leading online pension provider, enabling customers to interact with their savings through its unique combination of smart technology and dedicated customer service.

Since it was founded in 2014 by Romi Savova, PensionBee has been a challenger in an industry ripe for disruption. It has grown rapidly by helping consumers to solve the challenges they face when it comes to locating, combining and managing their pension savings. PensionBee counts 159,000 Invested Customers from 18-80 years of age with £2.7 billion in Assets under Administration as at 30 June 2022. Its range of pension plans are tailored to its customers and are managed by some of the world's largest money managers including: BlackRock, HSBC, Legal & General and State Street Global Advisors.

PensionBee uses its proprietary technology and Open APIs to allow customers to manage their pension easily, view their live balance, and with the help of a smart calculator to plan their savings, make contributions and withdrawals online, all with transparency on fees. It continuously engages with customers through its dedicated customer account managers using jargon-free communication and listens to feedback to develop new tools which help customers to easily plan for their retirement. PensionBee has consistently maintained a Customer Retention Rate and an AUA Retention Rate of >95% and an Excellent Trustpilot rating.

PensionBee is admitted to trading on the Premium Segment of the London Stock Exchange's Main Market (LON:PBEE).

 

END

 

 

NRAEANPXFEEAEFA