The amount of money that UK pensioners will need to save for a comfortable retirement has grown by three-quarters in real terms since 2002, a new study has found.
Researchers at Royal London estimate that savers will need a private pension pot of around £260,000 to avoid a slump in living standards, compared to the £150,000 required back in 2002.
It was also found that younger savers who continue paying rent in retirement may need to save as much as £445,000 - an increasingly likely prospect considering falling levels of home ownership.
"This research is a reminder that when we save for retirement we are chasing a moving target," Royal London personal finance specialist, Helen Morrissey, said.
"If our retirement pot is going to support us through a longer retirement and in an era of lower interest rates, we are going to need to build a much bigger pot than in the past."
The research applies to an average earner that draws on a state pension of £8,500 per year, and assumes that retirement will bring cost savings such as no mortgage and work-related travel expenses.
Royal London said falling interest rates were to blame for the increase in savings needed for retirement, with required pension pots steadily rising since the start of this century.
It was also found that pensioners that rent from a private authority or housing association would need to save an extra £125,000 on top of the £260,000 to generate a sufficient retirement income.
Those that rent from a private landlord would need an additional £185,000.
Morrissey said the research highlights how savers should not assume they will be mortgage-free homeowners in retirement, and that a large private rental bill may need to be factored in when planning.
"This research also has big implications for the mandatory 8% contribution rate from April 2019 for those who have been enrolled into a workplace pension," he continued.
"The government needs to act quickly to nudge people up to more realistic savings levels. Without this, millions of people will face a sharp drop in living standards when they retire."
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