The average 35-year-old needs to save £666,000 into their pension in order to match current living standards.
These figures have been published in a new report by pension provider Royal London, who has described the challenge facing young adults today as “frightening”.
Analysis by the firm showed that the average expenditure by pensioners is currently £1,183 a month, not including the state pension. Adjusted for inflation, which will see the figure rise to £2,930 by the time today’s 35-year-olds reach the age of 70 in 2050, most people will require a pension pot of £666,000.
Royal London said: “Worryingly the research found that today’s 30 to 40-year-olds have a median pension pot of only £14,000, well short of the fund they require to secure a monthly income that will just cover the basic £1,715 cost of essentials in 2050. Unless this group start to save more, they could face a retirement in poverty.
“This is to be able to secure a monthly income which will only just maintain the same standard of living of today’s retirees.”
Around 40 per cent of 30 to 40 year olds do not have any pension saving, according to Royal London’s figures, with more than half (54 per cent) not saving because they could not afford to, and a further 10 per cent saying it was too early to start saving in a pension.
Despite this, many young adults accepted that they would need at least 60 per cent of their salary in order to live comfortably in retirement. In comparison, today’s pensioners typically survive on less than half of their pre-retirement salary.
The pensions industry is calling on the government to introduce a new flat rate of pensions tax relief set at 33 per cent for all savers. Under the current system, lower paid employees only benefit from 20 per cent tax relief compared to the 40 per cent enjoyed by those on higher salaries.
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