Pension freedoms need more than a rule of thumb

People trying to work out how much money they will need in retirement should take proper advice, Carlton Hood has said.

The customer director at Old Mutual Wealth said that it was no simple matter to working out how long your pension savings will last.

“Many people apply a rule of thumb and plump for 10 per cent, thinking that is a reasonable amount and that their investments will grow to fill their pot back up.

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“Basically they are banking on taking 10 per cent a year forever,” he said.

However, he added that the reality was that, if they aimed to take approximately 5 per cent each year instead, their savings were much more likely to last for the 20+ years people generally spend in retirement these days.

Adviser view

Dean Mirfin, group director for Lancashire-based Key Retirement, said: “Pension freedoms will open up a wide range of options for savers to use all their wealth to deliver a retirement income and people need to look beyond pension funds.

“It is clear that savers have unrealistic expectations of how much their pension savings will deliver but by looking at assets in the round, people can achieve the comfortable retirement they are looking for.”