What does a £16k retirement look like?

In the UK we have the government-funded Retirement Living Standards to help guide us in planning for our retirement. They do research each year to show us what retirees can expect to spend, according to three tiers of luxury.

In recent years these figures seem to have grown a lot, to the point that they set an unrealistic target for people to strive for. It can be quite demoralising to hear that you are going to need spending of over £60,000 per year as a couple in order to be "comfortable". Since most people aren't spending anything like this whilst they are still working, where does all the extra come from?

When I looked at the "basket of goods" which is used, it was quickly apparent that some of the spending assumptions aren't at all correct for me. But we're all different. Perhaps some people are indeed spending £1000 a year on clothes and £1200 a year on "food for others". And this is at the "moderate" level, not the "comfortable" one.

I'm going to take the RLS categories of spending and adapt them for what I think is a reasonable benchmark - a £16k retirement. That's £16k spending per person, whilst living as a couple. Compared to the three RLS categories of minimum, moderate and comfortable, this fits squarely between the first two. You can tell me in the comments whether this feels too basic or if it is in fact quite comfortable.

All figures here are per week, per person. Grocery prices sourced from Aldi.

Food     £110pw          

Groceries     £42pw:

cereal £0.95, milk £0.99, bread £1.49, margarine £1.49 per 8 weeks,  jam  £0.89 per 8 weeks, coffee £2.49 per 4 weeks, orange juice £1.15,  bacon £2.69 per 2 weeks,  croissant £1.99 per 2 weeks, yoghurt £1.09,  banana  £0.16 x 3,  eggs £1.75 6pk per 2 weeks,  sausages £1.79 6pk per 2 weeks, chocolate biscuits £0.89,  nuts and raisins £1.69 per 4 weeks, tea bags  £1.39 per 8 weeks, apples £2.75, cream cheese £0.95 per 2 weeks, cake £1.99 per 2 weeks, 

oranges £1.89 per 2 weeks, blueberies £1.09 per 2 weeks, onions £0.95 per 8 weeks, spaghetti £0.75 per 4 weeks, carrots £0.79 per 4 weeks, leeks  £1.39 per 8 weeks, bread rolls £0.75, squash drink £0.99 per 4 weeks, tuna £0.65 per 2 weeks, mayonnaise £0.95 per 8 weeks, ketchup £3.39 per 8 weeks, lettuce £0.89 per 2 weeks, tomatoes £0.99 per 2 weeks, cucumber £0.89 per 2 weeks, beetroot   £0.75 per 2 weeks, lamb mince £5.49 per 4 weeks, flour £1.09 per 4 weeks,  mixed herbs £0.59 per 8 weeks, potatoes  £1.19 per 2 weeks, tomato puree £0.59 per 4 weeks, frozen peas £1.09 per 4 weeks, frozen sweetcorn £1.49 per 4 weeks, salmon £6.99 per 4 weeks, rice pouch £0.65 x 2, single cream £1.09 per 2  weeks, custard £0.59 per 2 weeks, ham £1.69 per 4 weeks, pickled onions  £0.79 per 4 weeks, coleslaw   £0.75 per 4 weeks, beef mince   £3.09 per 4 weeks, bonognese sauce £1.49 per 4 weeks, baked beans  £0.41, cod  £3.39 per 4 weeks, cheese  £2.79 per 2 weeks, frozen chips £1.99 per 4 weeks, tinned peaches £0.99 per 4 weeks, chicken  £6.49 per 2 weeks, curry sauce £1.69 per 2 weeks, mixed peppers £1.69 per 4 weeks, gravy granules £1.09 per 8 weeks, ice cream £2.29 per 2 weeks, soup £0.65 x 3

                        

Eating out    £52pw

                        Pub meal    £20 weekly

                        Coffee and cake £7 twice per week

                        Breakfast     £10 weekly

                        Dinner with friends at restaurant £35 once per month = £8pw

Takeaway    £6pw

                Chinese takeaway £12 twice per month

Alcohol at home    £10pw

beer 6pk lager £4.99, wine bottle rioja £4.99                   

Clothing   £5pw    £260 per year for clothes and footwear

Household £42pw

    Water rates    £5pw

    Council tax    £15pw

    Household insurances    £2pw

    Fuel            £15pw

    Decorating            £4

    Boiler servicing    £1

Household goods    £20pw

The RLS go into minute detail such as working out the lifespan of your doorbell. I'm just going to go with their figures on this category!

Household services £4pw

Mobile sim deal     £6pm

Broadband            £11pm

Personal goods and services     £4.40pw

    Hand soap    £1.39 per 8 weeks

    Suncream    £2.99 per year

    Toilet roll    £2.79 per 2 weeks

    Shower gel    £0.99 per 8 weeks

    Razor blades    £1.49 per 8 weeks

    Shaving foam    £0.95 per 8 weeks

    Mouthwash    £0.89 per 4 weeks

    Toothpaste        £2.49 per 4 weeks

    Floss            £0.99 per 4 weeks

    Deodorant    £1.99 per 4 weeks

    Shampoo/conditioner    £0.99 per 4 weeks

    Hand and body lotion    £1.99 per 4 weeks

    

Health    £5.3pw

    Glasses                £1

    Dental checkup    £1

    Dental work        £2

    Podiatry                £0.6

    Paracetamol    £0.37

    Cold & flu        £0.99 per 4 weeks

    Germoline    £1 per 8 weeks

Motoring    £3750 shared = £36pw

    Car - 4 year old EV replaced every 4 years £15k, trade-in £3k = £3k per year depreciation

    Tyres                £150

    Insurance        £250

    MOT                £40

    Breakdown cover  £50

    Misc repair     £140

    Public charging    £120

Leisure goods    £3pw

    tv / laptop / printer / ink    £3pw - £150pp per year on devices

Leisure services     £78pw

    Netflix or alternative    £2pw

    Activities                        £16pw    eg pub quiz / clubs / days out / admissions

    Holiday: 1 week cruise £1500 = £29pw

    Holiday: 1 week cottage in UK £400 = £8pw

    Holiday: Budapest city break 5 days £350 = £7pw

        £100 flight + £150accom + food/misc £200 = £350 = £7pw

    Holiday: Spa break in UK 3 nights £300 = £6pw

    Holiday spending money £500  = £10pw

  Total £307.70pw = £16,000

What does this retirement look like? A couple sharing one car, eating out 2-3 times a week, going on 4 trips per year. Does that strike you as "comfortable" whilst keeping an eye on their spending? You could easily expand that spending, with more exotic travel, or not watching the day-to-day spending.

For me this establishes £16k (in terms of 2025 spending power) as the minimum retirement I want to aim for. I'd like more travel. Other than that, I don't think there's any category that I would want to expand.

I previously wrote about how to reach a £16k retirement at State Pension age, for those who haven't pursued early retirement, and this article is intended to partner that one.

Want to read more of my ideas? I have a new book out - Build Your Retirement, 5 ways to improve your wealth in retirement. Or other books here. 

Or you may prefer my FIRE series for beginners.

If you only do one thing...

This is a short post for those who are not interested in pensions, or investing, or financial freedom. The ones who go through life spending their earnings and not giving any thought to retirement.

If you would like to retire with a bit more comfort that just your State Pension, follow these steps:

• Open a SIPP account at InvestEngine.
• Set up a monthly direct debit in there.
• Set it to buy a fund. (Here I must tread carefully. I must not tell you what to buy, but I can point out that the FI community likes passive global equities funds where you simply try to own the whole stock market, such as Invesco FTSE All-World FWRG.)
• The monthly amount depends on your age now, see table below:

Age  Amount per month

40    £92

41    £100

42    £108

43    £118

44    £128

45    £140

46    £153

47    £167

48    £183

49    £201

50    £222

51    £244

52    £270

53    £301

54    £335

55    £376

56    £424

57    £481

58    £550

59    £636

60    £743

61    £882

62    £1,068

63    £1,332

64    £1,725

65    £2,388

66    £3,708

67    £7,682*

* this is above the contribution limit.

For clarity, these are the amounts to contribute based upon when you're starting. You just give that figure a little uplift each year to account for inflation. So if you're starting at 40, pay in £92pm and next year nudge it up to £95 or so. You don't have to increase it by going down this list - that would be brutal. These later figures are for the late starters who must catch up.

This isn't guaranteed, it may fall short, but it is your best chance.

That's it, you can go.

Oh, you want to know why? Oh okay then. I'll explain. But if you really are bored with this stuff you can skip this bit.

This is based on you having spending of £16k per year in retirement, meaning an after-tax top-up of £4k over your State Pension.

(These figures are in today's spending power. The actual numbers may change with inflation but this plan should give you the same spending power as £16k in 2025 money.)

Why £16k? Well, a full State Pension is about £12k, and that gives a bit of a meagre existence. Assuming that you are living slightly more cheaply as a couple, £16k should be the boost needed to give you a reasonable standard of living. It is probably enough to add a car to your lifestyle, plus the odd holiday and some meals out.

I've done a separate post about what a £16k retirement looks like.

The calculations

Figuring out the income tax on the pension withdrawal for the annual top-up:

£16,000 - £12,030 State Pension = £3,970 to top up.

Taxfree personal allowance is £12,570. Anything above that will be taxed at 20%, excepting 25% of any personal pension withdrawal which is taxfree. 

If you draw £4,550 from your personal pension, 25% is taxfree: £1,137.50.

The 75% taxable portion of the withdrawal is £3,412.50.

£12,570 - £12,030 = £540 remaining personal allowance.

3,412.50 - 540 = £2,872.50 to be taxed at 20% = £574.50 tax. 

4550 + 12030 = £16,580 - £574.50 tax = £16,005.50. Close enough!

Scaling this up to get a target

I went onto FIREcalc.com and put in a spending figure of £4550, 32 years (ie from age 68 to 100) and by trial and error found that a pot of £119,000 gives a 95% chance of success. 

I figure a 95% success rate is about right to strike for. It would take another £17k to reach a 100% success rate, and I figured that this is pretty unlikely, given that few of us will live to 100, and by that point we're likely to have released equity from our home or reduced our leisure spending.

Then I worked backwards to see how much you'd need to invest monthly, from a variety of start ages, to reach this target. I did this using a Compound interest calculator, and some trial-and-error.

Notes

• This assumes you get your State Pension on your 68th birthday. I know they're using a sliding scale of birth dates and adjusting pension dates upwards, so this is a rough guide for everyone rather than exact for you.
• The monthly amount is net - it gets scaled up with some government money.
• I'm assuming you have no other personal pension. If you do, you'll be able to reduce these figures somewhat, but look at your funds and fees to make sure it's performing.
• You may get a shortfall, you may get an excess. 
• You need "relevant earnings" to match these pension contributions, such as salary, but excluding rents.
• That InvestEngine link is a referral link. If you use it, you apparently get a freebie and so do I. 

Want to read more of my ideas? I have a new book out - Build Your Retirement, 5 ways to improve your wealth in retirement. Or other books here. 

Or you may prefer my FIRE series for beginners.

Paying into an employee's SIPP

Often the best option for an employee is for their employer to contribute to their SIPP rather than the more usual workplace pensions such as Nest or People's Pension. Fees are lower, and they'll have a wider choice of funds. This change can easily double someone's personal pension.

The barrier to this is often the admin. Employers are often concerned that doing this will be difficult or time-consuming and thus costly.

Looking at the online help for the various popular payroll packages, all seem to suggest that setting up a SIPP contribution is straightforward. It is simply set up as a new pension scheme on the system.

What are the requirements of the popular platforms?

AJBell accept employer contributions and have a guide article on their website on how to set them up. Contributions can be made by bank transfer or direct debit, and on a one-off or regular basis. They also accept cheques. To set up regular contributions they have a PDF which can be emailed or posted to them once completed by the employee and employer.

Hargreaves Lansdown accept employer contributions and have a guide page on their website on how to set them up. This can be done by bank transfer using details listed on the guide page, or by direct debit which needs a PDF to be printed, completed and posted in. They also accept contributions by debit card over the phone.

Interactive Investor accept employer contributions and have a guide article on how to set them up. They have a PDF which can be completed online or printed, which allows you to fill in the details and can be submitted by their secure messaging or by post. The employee can fill in most details, they'll just need to get the employer to complete the direct debit instruction.

InvestEngine don't yet accept employer contributions but say they it is one of their top priorities to add. 

Vanguard don't accept employer contributions. The only exception is for directors of the company, with payment made by a business debit card.

Want to read more of my ideas? I have a new book out - Build Your Retirement, 5 ways to improve your wealth in retirement. Or other books here. 

Or you may prefer my FIRE series for beginners.

Having A Wobble

This "financial independence" lark is a new idea that we all have to absorb, and this happens on different levels. We can understand it logically, intellectually, and still take some time to catch up emotionally.

After all, we're not all that many generations removed from being hunter-gatherers, so it is a challenge to really grasp at an emotional level concepts like "you can stop working and it'll be okay." We can just about cope with "you'll get a monthly pension for life", so it's not surprising that we find it harder to deal with "a 4% drawdown from this investment pot won't let you down. Probably."

A friend recently gave me a shout. "I'm having a wobble."  Now, this friend knows his stuff. And he's been doing this long enough to be at the point of hitting FI and leaving his job. That means he has had plenty of time to get to grips with the different aspects of it, but at the same time his imminent retirement is probably what is causing him to think about the whole thing a bit deeper.

This just goes to show that none of us are immune to a case of the wobbles.

My first response to him was, "Well, you know that you're not going to run out of money." And from there we chewed it over a bit more, mostly with me listing the backups and contingencies that he has in place. 

So I thought you may appreciate the same pep talk.

Yes you have your portfolio built. You have a sensible withdrawal rate planned. We've stress-tested it against historical data using tools like FIREcalc, and plotted out the trajectory of your wealth using fireplanner. There is lots of reassurance that you're going to be okay.

As for backups and contingencies, you probably have some of the following:

• State Pension will kick in, giving a certain income for the later part of your retirement.
• You have an element of "fun" spending which you can cut during a stock market crash, to further protect your portfolio.
• You may have a holiday home to sell, or other assets that you can liquidate - a boat, a motorhome, your precious collection of vintage Star Wars toys or Aunt Nellie's jewellery which she left to you but you're not actually all that bothered about. (Sorry, Auntie!)
• You may get inheritances.
• You could downsize your house, and probably should before you get too old to face the upheaval of moving.
• You could use equity release on your home. From the age of 55 you can cash in up to 70% of the value of your house.
• You could earn some money. Even if you found your career job tedious (or worse), even taking on some part-time minimum-wage work would ease the pressure on your portfolio if things are going badly wrong. And a lot of low-paid work can be quite fun. The fun stuff tends not to pay well.
• You could relocate somewhere cheaper, even to a cheaper country. You could live in Thailand, India, Colombia or Romania for perhaps a third of the cost of living in the UK. (If you are running out of money, this is more likely to be later on in your retirement, in which case there may be fewer family ties like older relatives to stop you from considering this.)

If all of these backups aren't enough to reassure you, the other alternative is to look at your withdrawal rate in a different way. By treating your "core" spending separately to your "fun" spending, you may be better able to see how low your core spending needs are. I wrote about this more in the Two Pot Stratagem.

Want to read more of my ideas? I have a new book out - Build Your Retirement, 5 ways to improve your wealth in retirement. Or other books here. 

Or you may prefer my FIRE series for beginners.

Are We All Being Too Cautious?

In our retirement planning, we automatically play it safe. We scale down average growth of 7% and instead plan on spending 4%. We try to pay off a mortgage to own our homes outright, only to leave a legacy. And we are often shy of including our state pension in our calculations.

What if we look at the average case instead? With all the safety margin stripped out.

Let's say that I want to retire with £20k annual spending, and live with my partner in a £300k home. I'm 54, so I'll get my full state pension in 14 years.

We would normally start by saying I need £20k x 25 = £500k invested to give me an income. But hang on, if the "x 25" part of that is reflecting a 4% safe withdrawal rate, in this "average case" example don't we need to change the numbers to account for 7% average growth? That means (...plays with calculator...) we need "x 14.3". That would mean a pot size of £286k instead.

Furthermore, with state pension kicking in to provide £12k income in just 14 years, a part of that pot won't be needed. This is harder to calculate, as it involves a dwindling pot. I'll need a compound interest calculator for this. 

I'm aiming to figure out what starting pot size I need for 14 years of £1k per month withdrawals at 7% growth, for this bridging fund until my state pension kicks in. On top of that I'll need a second fund of £8k x 14.3 = £114.4k for that ongoing top-up from a state pension level retirement to a £20k spending retirement.

I'll ignore income tax in these calculations, since it is likely to be negligible. If I'm using a personal pension for most of this saving, £20k of income may mean under £700 per year of income tax.

Here's the compound calc result:

It thinks I'll need a pot of £107k for the heavy lifting part of the plan. 

£107k + £114.4k = £221.4k investment pot needed.

Finally, there's the house to pay for. Here there's another way to pare down the capital needed. We normally project to have our house paid off, leaving the capital in it as a safety margin which could be used for equity release or as a legacy after we're gone. Let's juice it instead.

We can use equity release to free up a maximum of 70% of the capital in our home. For ease of maths let's call that 66% and say that I only need £50k invested in my half of the £300k house. 

All together this means I need a net worth of £271.4k to retire at 54 with a £20k spending level. 

We had started out thinking I needed £500k invested + £150 house equity, so a net worth of £650k.

Remember, this is an "average conditions" plan. We've been applying a safety margin of 2.4x to our plans.

Conclusion

Certainly there is some safety margin needed. We could hit a poor sequence of returns with a stock market crash early in retirement. Or we could have unplanned spending, such as care home costs, which eat into the pot enormously. And certainly juicing the house equity won't suit everyone. But this does go to illustrate how much padding we normally apply.

If your numbers are anything like approaching these ones, you may be reassured to learn that you're actually finished with building your necessary pot of net worth, and are on the final task on adding the safety margin.

Want to read more of my ideas? I have a new book out - Build Your Retirement, 5 ways to improve your wealth in retirement.

Better than Bonds

Although bonds give a terrible return compared to stocks, the traditional advice has been to hold lots of them. A "traditional" portfolio contained 60% stocks, 40% bonds. Or you would be "lifestyled" into bonds gradually as you approached retirement - with some pension companies starting that process as early as your twenties (I'm looking at you, Nest!). 

That gives one hell of a dent to your performance. Why do it? What were people afraid of? Well, it comes back to the big problem with the stock market - its volatility, and the possibility that you retire right before a crash that then lingers for years with subdued prices and no returns.

The logic ran that bonds would tend to react in the opposite way to stocks. When stocks crashed, bonds would bounce up, providing a counterbalance which would smooth away your volatility.

The elephant in the room was this whopping 40% of your portfolio which was doing nothing the rest of the time. You needed far more stocks in order to be able to retire, which led to working for more years... a big mess, if you ask me.

Even worse, bonds now seem to be broken. That opposite action to stocks during a crash hasn't really happened during the most recent crashes. Ever since central banks took to printing money to get out of trouble ("quantitative easing") the bond markets seem wise to the fact that governments are trying to scam them, and bonds haven't bounced up as expected.

I think bonds are an awful thing to do to your portfolio (but then I am an avid owner), and this leads me to look for alternatives.

The Alternatives

There are three obvious alternatives to holding bonds continually.

1) Hold bonds short-term, whilst needed.

2) Go into retirement with a cash buffer.

3) Flex your spending.

The logic to each of these will become clearer if we have a look at the actual risk we're trying to manage...

Bonds are a blunt instrument to deal with "sequence of returns risk". This means the risk that a stock market crash comes along soon after you retire and wipes out enough of your portfolio that your drawings cause damage from which it will never recover.

We try to guard against this risk, to a degree, by applying a safety margin to our drawdowns. Earnings and typical growth are about 10% per year, and of that we start by leaving in 3% to cover inflation. We could theoretically go out and spend the remaining 7% each year forever, but in fact we play it safe and try to draw just 4%. This jiggle factor is an attempt to account for the stock market dips which come along all the time. And this'll work, with normal run-of-the-mill dips. 

If the big one comes along, and prices stay subdued for a number of years (instead of the more common profile of a crash which sees a recovery within months), then this may not be enough. We will spend years withdrawing an effective higher rate than our safe 4% and perhaps higher than our actual 7% of earnings.

Conversely, if we get a few "normal" years after we retire, the difference between those 7% earnings and our 4% spending starts to add up and our portfolio grows. Our withdrawals reduce, as a proportion of this now larger pot, and over time a 4% withdrawal rate turns into a 3.5% withdrawal rate. If we were to encounter a bad crash now, we are much safer. Few crashes would ever have wiped out someone using a 3.5% withdrawal rate.

Let's take a look at those three solutions.

Bonds - in the short-term. The usual way to do this is to create a "gilts ladder". Gilts are UK government bonds, and you can buy short-dated ones which will pay out in a matter of months. You still earn a little on them, but they're safe as houses. I could buy one which matures next January, another one which matures next April, and so on, to build myself a series of dollops of income which will drop every few months over the next couple of years. By using these I'll not need to dig into my main portfolio for income, or at least not much, and I'm still holding an asset which earns me at least some return in the meantime.

A cash buffer. This works in a similar way - I'd move a chunk of money from stocks and into cash, which earns me some interest but ultimately it's safely waiting there to be spent.

Flexible spending. This one works well if your retirement plan includes some excess over and above your core spending needs. With flexing you leave the money invested in nice productive stocks, and you say I shall reduce my spending whenever the market is badly down. If your original withdrawal rate was 4% and then in a crisis you are able to cut it to 3.5% or 3%, we're back in extremely safe territory where few historic crashes would have killed a portfolio.

Which is best?

I like any solution which only takes you out of a full allocation in stocks on a temporary basis. In practice, probably a combination of some of these approaches will appeal to most people. Flexing certainly fits with our natural instincts during a crash, to draw our claws in and halt unneccessary spending. A cash buffer or gilts ladder brings some certainty of income. (Though it is unclear whether continually topping up a buffer once retired would bring any further benefits.)

The main thing is that you don't feel that you must automatically abandon your stocks and buy bonds permanently. There are good alternatives which can be used instead.

The £30 a month retirement plan

I recently made the mistake of reading the comments on a newspaper story about financial independence. The trolls were wallowing in their self-imposed misery, saying that it's all very well for rich people, blah blah blah. So I thought that I'd take a look at how very ordinary people can make a difference to their retirement.

I looked at what it would take to boost an ordinary, state pension retirement by 50%.

In case you'd like to play along, this was done using the compound interest calculator here: www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

A full State Pension gives you just about £12k income, and it looks like it'll begin at around age 68 for most of us. Under the current rules, that will basically use up your tax-free Personal Allowance, meaning that any additional income is likely to be taxable. This gave me the target of £6k extra income, after tax, to find.

£12k a year sounds pretty meagre to me, and boosting it to £18k sounds like it would make quite a difference in lifestyle. I think it would make the difference between a couple running a car and going on some holidays, or using the bus and struggling to afford any travel.

We'd need a little more than £6k, to account for income tax. Let's work out roughly how much. Maths isn't my strong point so a bit of trial-and-error is required here for me to estimate that £7k is needed. Here's my reasoning. If this income is coming from a personal pension, 25% of the withdrawal is tax-free and then the rest will be taxed at 20%. £7k - 25% leaves £5,250 to be taxed at 20%, meaning £1050 of tax coming off the £7k to leave about £6k.

If we use a safe withdrawal rate of 4% per year, we'll want a retirement pot saved up of 25 x £7k, or £175,000.

Time to fire up the compound interest calculator to see what it will take to reach that target, using some more trial-and-error.

I'm assuming someone begins earning at age 20, so they have 48 years of saving and compounding, to take them to age 68.

My assumption here is that they'll invest in a global index tracker fund, giving them the market's average return without the risk of investing in individual companies, so that they don't have investing decisions to make.

Ignoring inflation, so that we can keep everything in today's pounds (to make the spending figures make sense to us in terms of buying power), these index funds have given a long-term average return of 7% per year.

£30 per month invested into a SIPP will give an additional £7.50 from the government - we get our income tax money back on pension contributions.

Over our 48 years that monthly contribution builds into a total of £177,878. And just look at the chart to see how much of that total is actual contributions from work, and how much is from compound growth - ie money that we haven't had to go out and earn! 

Long time coming

More than 80% of the pot has come from compounding. This just goes to show the power of time with compounding, and the advantages of an early start.

Unfortunately, most of us aren't starting from age 20. We have less time for compounding, so we'd need to throw more money at the problem to reach the same result.

I realise that some people struggle to make ends meet through no fault of their own, but I think most of us would be able to find £30 a month if we set our minds to it. Many of us fritter considerably more money than that on things which we don't particularly value. But this is the cost of a more comfortable future. I think it's a pretty reasonable sacrifice to make.

In fact, these are the sort of numbers which the government have in mind with auto-enrolment into workplace pensions. They want to give us the nudge to save for our own retirements, not at any particularly high level, but just this sort of boost from £12k a year to £18k, where we will be looking after ourselves a bit more.

Unfortunately that has been done poorly, with a lot of our money misdirected so that the typical workplace pension doesn't give anything like as good a return as a simple global tracker, and the people miss out on much of that power of compounding as a result. But that's a soap-box for another day.

I think that most people reading this will be throwing considerably more energy at their retirement than £30 a month, and they'll be seeking an earlier retirement than at state pension age. But the next time someone grumbles "it's all right for the rich", remember what a small step like the one illustrated here would achieve. We can all make use of the power of compounding, in order to secure a better future for ourselves.

Want to read more of my ideas? I have a new book out - Build Your Retirement, 5 ways to improve your wealth in retirement.