The cost of a comfortable retirement is now thousands more each year
The Retirement Living Standards report has revealed exactly how much people will need to have each year in retirement in order to live the lifestyle they want. But pension experts warn only 9% of people might have enough in their pension to afford a ‘comfortable’ retirement.
The Pension UK report calculates how much a minimum, moderate and comfortable retirement will be for single people paying all of their bills on their own and for couples who will be able to split some costs. The latest update showed how costs have increased, with some lifestyles costing up to £2,000 more than last year.
Minimum
A minimum retirement now costs £13,900 for one person and £22,500 for two, previously this was £21,600 for a couple. The minimum annual amount covers basic needs like groceries, property maintenance and 3 rail fares a year.
It also includes some minor luxuries like a week-long UK holiday, a TV licence and streaming with ads.
Moderate
Last year, a single person needed £31,700 each year for a moderate retirement and couples needed £43,900. Now, it costs £1,000 more for singles and £1,500 more for couples each year.
This covers the basics that a minimum retirement income does as well as some extras like a small car, one annual overseas holiday as well as some spending money and spare cash for charity donations.
Comfortable
A comfortable retirement covers everything a moderate income does with the space to afford to spend more on all of the basics, like an extra few hundred each year for house maintenance.
It also covers multiple rail fares, multiple holidays, extensive broadband and entertainment subscriptions, £1,500 for new clothes and spare cash for gifts, charity and treating the grandkids.
Currently, this will cost £45,400 a year for a single person and £62,700 a year for couples. Last year, these figures were £43,900 for singles and £60,600 for couples.
The updated figures reflect increased cost of living across a number of necessities like food, essential bills, transport and social activities. Pensions UK, the firm behind the report, estimates that around 82% of the working population will be able to reach the minimum standard of living in retirement.
However, it also expects just 23% to reach a moderate lifestyle and only 9% could save enough for a comfortable retirement. The experts are concerned that the new report may not be what people expect for their retirement.
Zoe Alexander, Executive Director of Policy and Advocacy at Pensions UK, said: “The latest update to the Retirement Living Standards underlines a clear reality for many people, today’s saving levels will not be enough for the retirement they expect.
“Without action, too many risk facing a cliff-edge drop in income when they stop work. The Government is right to be considering whether minimum contributions need to rise through the work of the Pensions Commission.”
