What is enough for a pension?
What is enough for a pension?
Pension planning is an essential aspect of financial well-being, yet it's often overlooked in personal finance discussions. As you envision your golden years, one of the most crucial questions to consider is: "Will I have enough to maintain my desired lifestyle in retirement?"
This question can take various forms, such as "How much pension will I be able to draw down?" or "How much will I need during retirement?".
Let's explore some key considerations, including determining an adequate pension, the role of the state pension, and the feasibility of relying on family support.
Defining "Enough" for Retirement
Determining what constitutes “enough” can be complex, and certainly differs person to person. It’s widely accepted that retirement income should be between 50-80% of your pre-retirement earnings, but several factors should be taken into account:
- Your location within the UK and the associated cost of living
- Your housing situation (renting, mortgage-free, etc.)
- Your overall health and any related expenses
- Any family obligations or dependents
- The impact of inflation
While the 50-80% guideline multiplied by the estimated years until your life expectancy can provide a rough estimate, it's important to consider these additional factors for a more accurate projection.
It's worth noting that you typically don't withdraw your entire pension pot on the first day of retirement, therefore, won’t need the exact amount at retirement. It’s highly likely that your pension will remain invested, whether through a Personal Pension or a Workplace Pension Scheme, and potentially continue to compound - excluding the amount you draw down at your preferred cadence.
The Role of the State Pension
In the UK, the state pension serves as a foundation for retirement income. As of the 2024/2025 tax year, the full new State Pension is £221.20 per week. However, eligibility criteria and entitlements may vary based on your National Insurance contributions.
While the state pension provides essential support, it often falls short of meeting the recommended retirement income threshold for many individuals. Relying solely on the state pension could result in a significant income gap, particularly for those accustomed to a higher standard of living or facing unforeseen expenses.
At an annual income of around £11,472 for those receiving the full entitlement, the state pension alone may not be sufficient to fund a comfortable retirement for many retirees.
Ultimately, while the UK state pension provides a foundational income for retirement, it is generally advisable to supplement it through additional retirement savings and income sources to maintain your desired standard of living.
Relying on Family Support
Islamic teachings emphasise the importance of honouring and caring for parents, as found in Surah Nisa, 4:36:
وَٱعْبُدُوا۟ ٱللَّهَ وَلَا تُشْرِكُوا۟ بِهِۦ شَيْـًۭٔا ۖ وَبِٱلْوَٰلِدَيْنِ إِحْسَـٰنًۭا
"Worship Allah alone and associate none with Him. And be kind to parents".
While relying on family for support during retirement may seem aligned with these noble teachings, expectations of family support should be met with a realistic assessment of feasibility.
Open and transparent communication with family members regarding retirement plans and expectations is essential. Discussing these matters early on can help align perspectives and ensure that any support provided is sustainable and does not compromise the well-being of yourself and family.
Family support can be a valuable supplement, it probably should not be the sole or primary source of retirement income. A well-rounded retirement plan should incorporate various income streams, such as the state pension, personal savings, and workplace or personal pensions. This diversified approach not only lessens the potential burden on family members but also provides greater financial stability and independence during your golden years.
Remember, it's never too late to start planning and saving for retirement. Whether you're just entering the workforce or nearing retirement age, proactive financial planning is crucial to ensuring a comfortable and fulfilling retirement.
Risk Warning: Equity investments are not readily realisable and involve risks, including loss of capital, illiquidity, lack of dividends and dilution, and it should be done only as part of a diversified portfolio. Investments of this type are only for investors who understand these risks. You will only be able to invest in the company once you have met our conditions for becoming a registered member.
Please visit www.wahed.com/uk/ventures/risk for our full risk warning.
Risk Warning: As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.
Please visit www.wahed.com for our full terms and conditions
Maydan Capital Limited, trading as WahedX, is registered in England and Wales (Company No. 13451691), registered office: 87-89 Baker Street, London, W1U 6RJ, UK. Maydan Capital Ltd (FRN: 963613) is an appointed representative of Wahed Invest Ltd (FRN: 833225), an authorised and regulated firm by the Financial Conduct Authority.Wahed Invest Ltd. is registered in England and Wales (Company No. 10829012), registered office: 87-89 Baker Street, London, W1U 6RJ, UK and is authorised and regulated by the Financial Conduct Authority: FRN 833225.
Subscribe For More Islamic Finance Content
As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.
Wahed Invest LLC (Wahed) is a US Securities and Exchange Commission (SEC) registered investment advisor. Wahed Invest provides brokerage services to its clients through its brokerage partner Apex Clearing Corporation, a member of NYSE - FINRA - SIPC and regulated by the SEC and the Commodity Futures Trading Commission. Registration does not imply a certain level of skill or training. Wahed does not intend to offer or solicit anyone to buy or sell securities in jurisdictions where Wahed is not registered or a region where an investment practice like this would be contrary to the laws or regulations. Any returns generated in the past do not guarantee future returns. All securities involve some risk and may result in loss. Any performance displayed in the advertisements or graphics on this site are for illustrative performances only.
Disclaimer: Wahed Technologies Sdn Bhd ("Wahed") is a Digital Investment Manager (DIM) licensee issued by Securities Commission Malaysia (eCMSL/ A0359/2019). It is part of Wahed Inc. Wahed is authorized to conduct a fund management business that incorporates innovative technologies into automated portfolio management services offered to clients under a license issued pursuant to Schedule 2 of the Capital Markets Services Act 2007. All investments involve risks, including the possibility of losing the money you invest, and the track record does not guarantee future performance. The history of returns, expected returns, and probability projections is provided for informational and illustrative purposes, and may not reflect actual future performance. Wahed is not responsible for liability for your trading and investment decisions. It should not be assumed that the methods, techniques, or indicators presented in this product will be profitable, or will not result in losses. The previous results of any trading system published by Wahed, through the Website or otherwise, do not indicate future returns by that system, and do not indicate future returns that will be realized by you.
Wahed Invest Limited is regulated by ADGM’s Financial Services Regulatory Authority (“FSRA”) as an Islamic Financial Business with Financial Services Permission for Shari’a Compliant Regulated Activities of Managing Assets and Arranging Custody [Financial Permission No. 220065]. Our ADGM Registered No. is 000004971. Wahed Invest Limited utilises Abu Dhabi Commercial Bank as its banking partner/custodian
Wahed assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. Any strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. Furthermore, the information presented may not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance.
There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services and should seek advice from an independent advisor before acting on any information presented. Any links to third-party websites are provided strictly as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites nor do we endorse the content and information contained on those sites. When you access one of these websites, you are leaving our website and assume total responsibility and risk for your use of the third-party websites.
