MILLIONS of households may be looking at cutting back on adding to their pension pot as the cost of living crisis squeezes pockets.
Inflation could hit 15% this year according to economists and energy bills are predicted to rise to over £4,000.
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But if it’s possible, you should look to save for the future and set up a decent nest egg.
Most people underestimate what they’ll need for retirement so you could be left with a shortfall unless you know how much you have to put away each month.
So HSBC’s new calculator, which shows people how much they will need to save for their retirement based on their lifestyle, current pension and savings plan, could help.
It compiles data based on a number of factors, including how much money you want to spend in retirement, your current age and pension contributions and where you live.
For example, whether you’ll use a car when retiring and how much you’ll spend on shopping.
Then it tells you whether you’re on target to live your future desired lifestyle.
For example, if you’re looking to go on one weekend trip away in the UK per year after retiring, spend £59 a week on groceries and £730 on clothing and shoes you would need £36,700 a year.
If you contribute £100 to your workplace and private pension pot per month, live in London and are aged 30 you will be around £24,000 short of this target, as you would be receiving around £12,700 a year.
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To reach £36,700 and therefore your desired lifestyle, you would need to contribute roughly £1,100 a month to your private and workplace pension pot a month.
You can also amend your yearly target retirement income as well if you’re coming up short.
Insight from HSBC’s calculator found British adults face an average yearly shortfall of more than £11,000 after they retire compared to the lifestyle they want to live.
In a survey, more than six in ten users were not on target to meet their retirement lifestyle goals.
That was based on a survey conducted in January this year by YouGov of just over 1,000 retirees and 2,695 non-retirees.
What if I want more help with my pension?
If you’re looking for more help with your pension or you don’t know how much to put away each month, the Pensions and Lifetime Savings Association has a set of “Retirement Living Standards”.
They show people how much you need to put away each month if you want to live a certain type of lifestyle after retiring.
If you are earning over a certain type of money your employer has to automatically enrol you in a workplace pension scheme as well.
You have to be earning at least £10,000 a year to be enrolled.
If you can, you should stay in one as that will massively help boost your pension pot.
Even if you’re young and it seems a long way away, stashing away some cash for later years is worthwhile.
Emma-Lou Montgomery, associate director for Personal Investing at investment management company Fidelity International, said contributing to a workplace pension was the “number one rule in pension planning”.
She said: “Not only are contributions taken out of your gross salary beneficial from a ‘here and now perspective’ as they cut your tax bill, but they also attract the key benefit of pension savings – a nice little top-up from HMRC.
“And, now that employers have to add to the pot, they’re guaranteed to be even more worth your while, giving you additional money from your employer, over and above your salary.”
