According to the Scottish Widows Retirement Report individuals should be saving 12%1 of their salary to achieve a comfortable retirement. But with the average UK house price going up by 7.1%2 each year and the average British wedding totalling £20,5003 is it possible to save 12% and reach your lifetime goals?
What savings do you need?
The average Brit thinks they will need £23,4691 a year to feel comfortable in retirement. In order to achieve that you would need a pension pot of £330,0001.
The average UK property costs £191,8122 and the average deposit is currently 17%4 which means you would need a deposit of around £33,000.
Should you invest or pay off your mortgage?
If you add this to the cost of a wedding you currently need to save £383,500 over your lifetime (assuming you only get married once).
On top of this, it is recommended you have 3 months’ salary in reserve. Looking at the average UK salary, that is just under £7,0005.
To be on the safe side round that number up to £400,000.
Achieving you savings goals
The average interest rate on a cash account is currently 0.9%, that is providing you have not left that in your 0% current account. Cash savings are currently costing UK savers £4.1billion a year as inflation erodes the value of their money.
See how investing could work for you
The value of investments can go up or down so many deem this to be risky. But when looking at long-term savings past trends indicate that this could be a good way to protect your money. Whilst past performance should never be used to predict the future, projected returns of around 4.7%6 make it a lot easier to build that £400,000 pot.
Is it achievable?
When considering your long-term savings, you can afford to take more risk as the time frame is extended. If you were to open a ‘bold’ investment account for 35 years you would have that £400,000 if you invested just £80,000. This is a projection and is not a predictor of performance but all of a sudden a pot of £400,000 seems just a little closer.
1 Scottish Widows Retirement Report, 2015
2 Land Registry, House Price Index, January 2016
3 BBC News, March 2016
4 Which?
5 Metro, November 2015
6 Moneyfarm
