The cost of living a ‘moderate’ retirement has skyrocketed by a third in just a year, pension research finds.
A standard of living that includes £55 per week on groceries and a two-week all-inclusive holiday could cost a single person an annual £31,300, which is £8,000 more than last year.
This also includes spending £10 per week on takeaways and £100 per month to take others out for a meal, according to the Pensions and Lifetime Savings Association (PLSA).
The PLSA’s Retirement Living Standards report details what levels of income retirees will need to live either a ‘minimum’, ‘moderate’, or ‘comfortable’ life once retirement age is reached. However, the forecast does not factor in any rent or mortgage payments.
For couples, £43,000 per year is required to live comfortably, while £22,000 is needed for a ‘minimum’ living standard.
Its publication follows the International Longevity Centre’s announcement that the UK state pension age should be lifted to 71 to keep up with longer life expectancy.
Couples need £59,000 per year to live comfortably
As well as a ‘moderate’ life in retirement rising, so is the price to lead a ‘minimum’ living standard, which shot up by 12% from £12,800 per year to £14,400.
This is considered a post-working life that ‘covers all your needs, with some left over for fun’, but factors in having no car, a yearly spend of £620 on clothes and footwear, plus a week-long holiday in the UK.
A ‘comfortable’ standard of living, where there is more financial freedom and some luxuries, may cost £43,100 per year – a jump from £37,300 per year earlier. This rises further to £59,000 for couples to live comfortably.
Following the report, Quilter calculated that a total pension pot of around £459,000 is needed to live a moderate lifestyle, a hefty rise on the previous year’s amount of £301,000. Further, for a single person to live a ‘comfortable’ lifestyle, £738,000 would need to be in the kitty heading into retirement.
The increase in inflation, energy bills, and food prices over the last two years has contributed to an increase in what’s required to live in retirement. However, pension experts believe helping family members during the cost-of-living crisis coupled with people’s expectations of living standards have also played their part.
Money needed to live in retirement is ‘eye-watering’
Tom Selby, director at AJ Bell, said: “It was inevitable the surge in inflation we have seen over the last two years would filter through to Brits’ living standard in retirement, but these figures are nonetheless eye-watering.
“It is not just the inflation pressures on retirees that have driven this rise, however, with an extra £1,000 per year added to the costs of people in this group to help out family members struggling due to the cost-of-living crisis.”
Selby added: “While the costs of a moderate living standard have increased by the most, attaining both a ‘minimum’ and ‘comfortable’ standard of living in retirement has also become significantly harder, with inflation again the prime culprit.”
Becky O’Connor, director of public affairs at PensionBee, said: “Emerging priorities such as the ability to eat out more, enjoy more time out with loved ones, and help out family members financially highlight the evolving expectations and desires of the future generation of retirees.
“While the PLSA suggests a new set of life priorities could be down to the experience of Covid, it could also simply be that the financial demands placed on retired people, including by adult children who are themselves struggling to afford a decent lifestyle, are higher than they have ever been.”
