The pension figure that should scare you into saving

If you've put off saving for retirement, then the latest savings figures may scare you into doing something about it.

You may think that retirement is a cosy affair, filled with lots of holidays and trips to the golf club. Well it won't be if you plan on relying on the state pension.

The state pension will pay on average just £151 a week – that's around £8,000 a year – and won't cover a lot of holidays.

The chances are you'll want a more than that to live on in your old age. It may not be a lot more, you might not want £50,000 or even £25,000 a year, so how about £16,000 a year?

If the state pension makes up half of that amount, it shouldn't be hard to save enough to produce a measly £8,000 a year right? Wrong.

To generate an income of just £8,000 a year you'd need to save around £280,000.

To save this amount you'd need to save £583 a month for forty years – a staggering sum and a reason to invest in the stockmarket if there ever was one.

Estimates for the average pension pot range from £40,000 to £60,000 and regardless of the discrepancies in the figures, we can safely assume that most people are way off target.

Troubling numbers

There is a real concern that individuals are putting a plan in action now to ensure they have the retirement they want in the future, that they will be left clinging to a measly state pension and suffering an old age in self-imposed penury.

But the outlook could be even bleaker than that. What happens if the state pension is reduced further?

Pension minister Ros Altmann rejected the rumour this week that the Conservatives could return to a means-tested system for the state pension, and she confirmed that the flat-rate state pension will still be introduced next year.

However, what will the state pension look like in 20 or 30 years? There is a real concern among younger people that we will have to work until 75 before we can claim it, which is a scary thought for many (particularly those in manual jobs), but there's an even worse case scenario: the state pension just won't be there. If that's the case, you'll need to save £280,000 just to produce £8,000 on its own.

For people in their 20s and 30s, the onus is on the individual to make sure you save enough for retirement and if the £280,000 figure doesn't scare you into doing something, then nothing will.

Read more:

Only a third of-people will get the full flat-rate pension will

State pension will become less generous

Old vs young: a new battleground for pensions inequality