You now want £48,000 a YEAR for a ‘snug’ retirement. Here’s the way to get there

Workers saving for their retirement may not have faced the attack on their pensions by Chancellor Rachel Reeves that many feared.

But her Budget was still packed full of policies and details that reveal retirement saving could get harder.

Here’s how the Budget could affect your pension saving – and what you can do now to build a golden retirement.

1. Start to save as early as you can

Retirees will need an income as high as £48,161 to afford a ‘comfortable’ retirement by 2030, according to analysis of figures from the Office for Budget Responsibility, which were published alongside the Budget.

A comfortable retirement currently costs £43,100 for a single person, according to the Pensions and Lifetime Savings Association (PLSA). This would cover eating out, treating loved ones and the odd holiday.

But retirees will need an additional £5,000 a year by 2030 to achieve this standard of living, inflation figures from the OBR report suggest.

Part of this annual sum should be covered by the state pension, but the PLSA figures assume you own your home outright.

Such an income may be out of reach for the majority of retirees. But it is worth saving into your pension as early as you can and contributing whatever your budget will allow.

For example, someone who started paying 5 pc of a £25,000 salary into their pension at the age of 22 would have a retirement fund of £434,000 by 66, according to investment platform Fidelity.

This assumes their employer also chips in 3 pc, which is the minimum they are obliged to pay under the workplace pension auto-enrolment rules.

But if the same worker waited until 27 to start contributing, they would have a retirement pot worth £380,000 by 66 – £54,000 less than if they’d started saving earlier.

2. Use tax-free wrappers

Experts had feared the Chancellor would make pensions or Isas less generous, but she gave both a stay of execution.

However, there is no knowing what lies ahead, so it makes sense to use the allowances available to you now.

Pensions may attract inheritance tax when left to loved ones from 2027, due to measures announced in the Budget. But they retain the rest of their benefits.

That means all money put into your pension qualifies for tax relief, subject to generous annual and lifetime allowances. If you’re saving into a workplace pension, you also receive contributions from your employer.

Many employers match employee contributions. That means that if, for example, you are a higher rate taxpayer, for every £60 you put into your pension the Government tops it up to £100. If your employer matches your contributions, you would end up with £200 in your pension if you put in £60.

The Chancellor increased capital gains tax on investment profits on Wednesday. The new higher levels came into force overnight.

A basic-rate taxpayer who makes more than £3,000 in profits when they sell shares will now pay 18 pc CGT, up from 10 pc.

Higher-rate taxpayers will see their capital gains tax rate rise from 20 pc to 24 pc.

That means pensions and Isas, which allow you to grow your money free of tax on interest, capital gains or dividends, are more valuable than ever.

Jason Hollands, managing director at wealth manager Evelyn Partners, says higher CGT rates mean everyone should be focused on using Isa and pension wrappers to save.

‘Making use of tax-free wrappers is especially important if you are married or in a civil partnership and can take advantage of both sets of allowances, and transfer savings and investments so they do not attract unnecessary tax liabilities,’ he adds.

3. Enquire about salary sacrifice

Some employers offer a scheme that allows workers to boost their pension at no extra cost to themselves or their employer.

Workers agree to a reduction in their salary equal to the amount they put into their pension. In return, their employer pays the employee’s total pension contributions.

The benefit is that, as the worker is sacrificing part of their salary, both they and the employee pay less NI contributions – and the worker also pays less income tax.

These savings can then be used to boost the worker’s pension. For a worker, it amounts to free, extra money in your pension.

Some experts had feared that the Chancellor would crack down on this generous benefit, but it lives to see another day. Nonetheless, it makes sense to take advantage of it while you can.

Myron Jobson, senior personal finance analyst at DIY investment platform Interactive Investor, points out that salary sacrifice can be a useful way to make your headline income appear lower.

That may mean that you become eligible for benefits only available to those with incomes below certain thresholds.

For example, families lose entitlement to Child Benefit if one parent earns above £60,000.

In some cases, workers in this position who are just above this maximum may be able to bring their salary below it.

4. Give help to your children

Children also have generous tax-free allowances that can boost their savings.

For example, you can pay up to £9,000 a year into a child’s Junior Isa where their money can grow free of tax.

Alternatively, you can pay up to £2,880 into a pension for them each tax year, which the Government will top up to £3,600.

The power of compound interest means money saved for children can grow astronomically by the time they can access it in retirement.

For example, if you put the £2,880 maximum into a baby’s pension when they were born, it would be worth almost £72,000 by the time they could access it at the age of 60 – even if they never added a single penny to it.