Single people need £33,600 annual income to retire comfortably
Research on behalf of the Pensions and Lifetime Savings Association (PLSA), a pension trade body, has worked out exactly how much money people need to fund the lifestyle they want when they retire.
The study, known as the Retirement Living Standards, is developed and maintained by the Centre for Research in Social Policy at Loughborough University.
It sets out three different types of retirement: minimum, moderate and comfortable.
The comfortable standard would allow retirees to enjoy some luxuries like regular beauty treatments, theatre trips and three weeks holiday in Europe a year.
A couple would need a joint income of £49,700 a year to enjoy this lifestyle when they stop working.
The minimum standard allows for a week’s holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week. It does not include budget to run a car.
The amount needed for this type of lifestyle is £10,900 for a single person and £16,700 for a couple.
Most people should be able to achieve this level through a combination of the full state pension of £9,339 per year, and auto-enrolment in a workplace pension.
The moderate retirement living standard includes a two-week holiday in Europe and eating out a few times a month.
The annual budget for this standard is £20,800 for a single person and £30,600 for a couple.
The PLSA’s Retirement Living Standards were established two years ago and since then, more money for eating out, a higher personal grooming budget and the inclusion of a Netflix subscription are among the items added to come up with each budget.
Nigel Peaple, director of policy and advocacy at the PLSA said: “It is important that the Retirement Living Standards remain relevant by reflecting real world price changes and real world expectations about lifestyles in retirement.
“We hope the updated standards will encourage people to think about whether they are saving enough for the retirement lifestyle they want and, in particular, whether they are making the most of the employer contributions on offer in their workplace pension.
“The lockdowns caused by the pandemic have given many workers a foretaste of being retired and made people think about the activities and experiences they truly value.”
Tom Selby, head of retirement policy at AJ Bell, said: “The PLSA’s ‘Retirement Living Standards’ provide a valuable benchmark against which people can think about their pension planning, and it makes sense to update those Standards in line with what retirees spend their cash on.
“This is exactly how inflation works and should help ensure the Standards remain relevant to people’s experiences.”