A recent study by the Pensions and Lifetime Savings Association (PLSA) shows that the amount of money required to have a moderate standard of living in retirement has increased significantly.
The study found that the increase is 38% or £8,000 more than the previous year. This means that for 2023 to 2024, a single person would need £31,300, up from £23,300. Couples would need £43,100, up from £34,000, a 31% increase.
The study also found that the amount required for a comfortable retirement has increased. Singles would need 17% more, and couples would need 9% more. The minimum amount required for retirement has also increased by 16% for singles and 8% for couples.
However, it’s important to remember that these figures are not set in stone. Everyone’s retirement plan should be personal and unique, tailored to their financial situation, lifestyle, and aspirations. The study serves as a reminder of the changing economic landscape and its impact on retirement planning.
The Personal Touch in Retirement Planning
The PLSA’s Retirement Living Standards, meticulously calculated by the Centre for Research in Social Policy at Loughborough University, are designed to provide a framework—not a one-size-fits-all solution. They offer insights into what a minimum, moderate, and comfortable retirement could look like financially. However, they are tools to guide your planning process, not rigid targets to achieve.
Nigel Peaple, Director of Policy & Advocacy at PLSA, emphasises the importance of viewing these standards to engage with your retirement spending expectations. It’s about planning for your life post-retirement, which may vary significantly from the average standards.
Beyond the Average
Retirement costs have increased due to the current economic climate, including high food and energy prices and a change in social priorities. After the pandemic, people prioritise spending quality time with family and friends, affecting retirement budgeting. Alice Guy, Head of Pension and Savings, mentions that retirement expectations have changed, and people now value supporting younger family members and social engagements more.
These changes highlight the importance of creating a customised retirement plan. The expenses associated with your desired lifestyle, health, hobbies, and family obligations differ significantly from industry standards. It’s essential to plan accordingly to ensure you can afford the retirement lifestyle you want.
Planning for Your Retirement
The PLSA’s findings emphasise the importance of actively engaging with your retirement planning. To start, think about what you want to achieve in retirement. Do you want to travel, pursue hobbies, or support your family financially? Once you have a clear vision, you can create a financial plan that aligns with your goals.
While state pensions and workplace savings schemes are helpful, they may only cover some things. It’s essential to assess your savings, investments, and other sources of income to ensure that they meet your needs. Those in their thirties and forties, especially those renting in retirement, should focus on building a robust financial plan.
Urgent Need for Reform
The PLSA report raises concerns about retirement savings in the UK, calling for urgent reform to the workplace savings system. The cost of living in retirement is increasing, making the gap between the state pension and a decent standard of living wider. Steve Webb, a partner at consultants LCP and former pensions minister, warns that many people may have to choose between working longer or having a poor retirement.
