Today’s thirtysomethings need to have a pension pot of £666,000 to fund a comfortable retirement at the same standard of living as their grandparents have today.
Inflation will soar by a more than 150% between now and 2050, according to research by financial firm Royal London.
By then, state pension age will probably be at least 70 – even though 40% of those in their 30s are pessimistic about even having a state pension to draw on by then.
The firm worked out the average monthly spending of a pensioner today who is not reliant on the state pension is £1,084 a month.
Applying predicted inflation, this will rise to £2,930 a month by 2050.
The figure is not based on an extravagant lifestyle, but spending on day-to-day essentials, such as housing, heating, food and transport plus a few luxuries.
While those in their 30s need £666,000 to secure this lifestyle, the research found most have retirement savings of no more than £14,000 and stand no chance of escaping pension poverty unless their spending habits undergo a radical change.
Around 40% of those in their 30s do not believe they will have a state pension in 2050, even though 49% of today’s pensions say they rely on the state pension and 20% have no other income.
Royal London pension specialist Fiona Tait said: “Saving enough money for a basic comfortable retirement is a frightening challenge for most of today’s 30 year olds and one many of them will fail to meet.
“The research shows the level of income they must have to save enough just to keep pace with inflation, and they need to start saving sooner if they are not to have an impoverished retirement.”
Other key findings from the report into thirtysomething saving for retirement showed:
- 60% have a pension
- Most believe they need around 60% of their salary to fund a comfortable retirement although most of today’s pensioners get by on half their working income
- 54% say they cannot afford to save and 10% believe they can put off saving until they are older, while another 10% know little or nothing about pensions and how they work
“It seems many thirtysomethings do not understand that saving a little earlier is better than not saving at all,” said Tait.