Retirees underestimating basic living costs, finds survey
The specialist insurer estimates that retirees need a take home income of £14,631 per year to meet essential costs while enjoying some discretionary expenditure. This is £1,626 above the typical UK pension income (£13,006) and suggests that many may need to cut back on the more enjoyable aspects of retirement in order to meet regular bills.
The research asked 1,500 people between the ages of 40 and 70 how much they believed that they would spend on a typical shopping basket of expenses when they retired. Essential expenses such as utilities, food, clothing and household maintenance made up 72% (£10,598) of their expenditure while discretionary expenses such as socialising and holidays made up 28% (£4,033) of their outgoings.
Those aged 40 to 50 believed they needed the most (£17,549) followed by those aged 66 to 70 (£14,112) but those just about to retire (61 to 65) believed they needed the least (£11,568). This stark difference suggests that while people enter retirement determined to stick to a strict budget, they find that later life is far more expensive than expected.
The level of pension income received ranges between £11,754 (Northern Ireland) and £14,062 (London). The amount of income people believe they need varies far more – from £18,238 in Scotland to £11,864 in Yorkshire. The Scottish look to have the largest deficit between reality and aspiration.
Andrew Megson, Managing Director of Retirement, Partnership, said: “This research clearly shows that in order to heat and eat, people may well need to cut back on the more enjoyable aspects of retirement such as holidays, socialising and luxuries. This seems completely contrary to the picture of retirement that we generally aspire to and suggests that not only do people need to save more but they need to carefully budget their retirement income.
“While most employed people have some expectation that their income has the potential to rise in the future and budget accordingly, retirees are asked to guess what level they need their income to be for the rest of their lives…Retirement finances can be daunting but ensuring that you have the essential income you need means you can take greater investment risks with any other income you have.”