The current full new State Pension is £168.60 a week or £8,767.20 a year. The actual amount you get depends on your National Insurance record, although according to research from the Department for Work and Pensions, of the 1.1m people who receive the new State Pension, only 44% receive the full amount.
What’s more, according to research by the consumer magazine Which?, most retirees believe that the State Pension is not enough to live off in retirement.
According to a survey carried out by the consumer reviews magazine, most retirees need at least £18,000 a year to meet their basic income requirements in retirement.
However, I believe that it is relatively easy to double your State Pension, and today I am going to explain how with just a few extra pounds of saving every month.
How much is needed
To be able to double the State Pension, I calculate that a retiree will need roughly £220,000 saved at the time of retirement. My figures show that to meet this figure, a saver would need to put away £370 a month for 40 years, assuming the money is stashed in a savings account with an interest rate of 1% per annum.
If the same saver invested their money, they could hit the target a lot faster.
For example, over the past 10 years, the FTSE 250 has produced an average annual return for investors in the region of 9%. At this rate of return, contributions of £370 a month for 40 years would grow to be worth £1.75m.
This example clearly illustrates why it is so important to invest your money if you are saving for the long term. While it is difficult to predict where the stock market will head in the short term, over the next 10 or 20 years, as long as the global economy continues to expand, I believe the future is bright for UK equities.
Time to start saving
So how much would you need to save every month to hit the £220,000 target?
The answer to this question varies depending on how much time you have until retirement. If you have 40 years to go until your planned retirement date, I calculate a monthly deposit of just £45 is required to build £220,000 savings pot assuming the money is invested in a FTSE 250 tracker fund returning 9% a year.
Over three decades of saving, I calculate a monthly deposit of £120 would be required to double your State Pension in retirement. Over two decades around £350 a month is needed, and over 10 years, my figures show monthly contributions of around £1,200 would be needed to build a pension pot worth £220,000.
All of these numbers excluded tax benefits, fees, charges and other costs or benefits associated with pension saving.
Still, I think they clearly show how easy it is to double your State Pension in retirement by putting away just a few pounds away every single day. Over the long term, these small contributions can add up.