In Focus: Retirement Income  

How much do your clients really need?

Simoney Kyriakou

Simoney Kyriakou

Archie comics occupied a special place in my pre-teenage years. 

I picked up many corny jokes and catchphrases from the comics – many of which were second-hand ones dating back to the 1970s – and some of these have stuck with me. 

One punchline I often deliver was stolen right out of a short cartoon showing Archie Andrews' parents going through their household bills and trying to balance the books.

The wife turns to her husband and declares: "Fred, I've solved it! To make ends meet, we're simply going to have to stop buying necessities." 

It is an amusing cartoon and most of us would smile at the notion. But of course, we do not stop buying the essentials – what a thought! 

But this seems to be an expectation on people who retire.

'Cut your cloth according to your measure' is a motto by which many people of my mother's generation live their lives. The people I know who are that age have nowhere near the pension assets that we write about every day in FTAdviser (ie the £30,000-plus a year income). They get by.

So is it possible all our models are wrong when we keep telling people they need at least an income of £30,000 a year to enjoy a comfortable retirement?

Are we simply forcing people into making extreme sacrifices in their lives today, to afford that promised jam tomorrow?

Are we putting undue stress on the need to save for retirement, causing millions of people whose total pension pots average out at £60,000 to fear unnecessarily? 

How much do people really need? 

Of course, the easy answer is 'it depends on their circumstances'. But is it really that oblique? 

Put simply, if people just spent less in retirement, and grinned and bore it, they would be able to survive. Millions of people have done exactly that.

But will they continue to do so? And do you want to simply 'survive'? What kind of life would that be?

While many people may have lived relatively well on £16,000 a year, this does not mean they can do so in the future. 

Rising house prices that far exceed the average income; a contracting economy; low interest rates on cash and on bonds; rising inflation; and now a debt hole caused by Covid – all these things are putting financial pressures on the younger generations that older generations never had to face. 

My mother and her peers I know well all had defined benefit pensions and took annuities when rates were decent.

They mostly have all put some money aside into National Savings and Investments and are all mortgage-free. All their children (including yours truly) benefited from the grant scheme so there was no usurious student loan to pay off.