The Retirement Living Standards report has laid bare precisely how much people will need annually in retirement to maintain their desired lifestyle. However, pension experts caution that just 9% of people may have sufficient funds in their pension pot to afford a ‘comfortable’ retirement.
The Pension UK report breaks down the cost of minimum, moderate and comfortable retirements for single people covering all expenses alone and for couples able to share certain costs. The most recent figures show expenses have risen, with some lifestyles now costing up to £2,000 more than the previous year.
Minimum
A minimum retirement now requires £13,900 for one person and £22,500 for two, up from £21,600 for a couple previously. The minimum annual sum covers essential needs such as groceries, property upkeep and 3 rail journeys per year.
It also allows for some modest treats like a week-long UK break, TV licence and streaming services with adverts.
Moderate
Last year, a single person required £31,700 annually for a moderate retirement while couples needed £43,900. Now, it costs £1,000 more for singles and £1,500 more for couples each year.
This encompasses the essentials that a minimum retirement income provides plus some additional benefits like a small vehicle, one annual foreign holiday along with some discretionary spending and spare funds for charitable giving.
Comfortable
A comfortable retirement encompasses everything a moderate income provides, with room to spend extra on all the essentials, such as an additional few hundred pounds annually for home maintenance.
It also includes multiple rail fares, several holidays, comprehensive broadband and entertainment subscriptions, £1,500 for new clothing and spare money for presents, charitable donations and spoiling the grandchildren.
Currently, this requires £45,400 annually for a single person and £62,700 per year for couples. Last year, these amounts stood at £43,900 for singles and £60,600 for couples.
The revised figures mirror rising living costs across numerous essentials including food, vital bills, transport and leisure activities.
Pensions UK, the organisation behind the research, calculates that roughly 82% of the working population will manage to achieve the minimum standard of living in retirement.
Yet it also predicts just 23% will attain a moderate lifestyle and a mere 9% could accumulate sufficient funds for a comfortable retirement. The specialists worry that the fresh report may fall short of what people anticipate for their retirement years.
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.”