The Cost of Pension Insurance

The pension is a necessity for living a life style of your choice and for that they require a decent income after retirement. According to a report the workers will need to save several hundreds of thousands of pounds so that they will get a decent income even after retirement. Joseph Rowntree Foundation experts says that if a person has to get an income of £16,400 they will require to save £2,70,000 in their savings for pension and this will also supplement their pension of £144/week by state for single tier. This lump sum amount which you save can be used to buy you an annuity income of £8912 which is index linked and the state pension of £144/week will add up to £7488/year and added together will reach the threshold of £16,400.

If a person does not entitle for state pension he would require saving of £480,000 to achieve the threshold income recommended by Joseph Rowntree Foundation. A person needs to contribute to the national insurance for at least 10 years to get entitlement for state insurance according to the new single tier system. However, in current scenario if a person makes a year of contribution to national insurance he will be entitled to some part of the state pension.

If you require a retirement income equal to the minimum wage of £12070, a person would require a lump sum amount of £130,000 for those with entitlement to the state pension. For those with no entitlement to state pension will require a lump sum saving of £340,000. The living wage outside London is £14,527 and to achieve this with state pension entitlement you need saving of £190,000 and without state pension you will need saving of £400,000. In London the living wage is £16,672 and to earn an income similar to it after retirement you would require £280,000 along with state pension and £490,000 if you do not have entitlement to state pension.

If someone thinks of getting a wage similar to national average of £25,496 then they would require a saving of £550,000 if they have entitlement to state pension and if one is not eligible for state pension he would require a saving of £760,000. These figures are not imaginary but were calculated by one of the insurance companies that provide SIPP plans. Pension is a must for all to live a decent life style even after retirement.