Pensioners have been dealt a brutal blow to their finances as the cost of having a “comfortable retirement” has risen substantially, according to experts.
Calculations from interactive investor found that retirees would need around £69,000 more in their pensions during their retirement to live to a good standard.
Based on an analysis of 2022’s PLSA retirement living standards, the cost of a “comfortable retirement” for pensioners has increased by £4,200 since last year.
Older Britons required a total income of £47,700 in July 2023 for a “comfortable” post-work life compared to £43,500 in April 2022.
For context, that is the equivalent of £37,100 private pension income, assuming they get a full state pension of £10,600.
Don’t miss… Fixed energy deals trap warning as bill payers may get better deal if they wait
In order to get this extra £4,200 a year, pensioners will need a private pension pot worth £290,800 which is £42,800 more than what was needed the year before.
Comparatively, the cost of a “moderate retirement” has now risen by £2,600 a year which will require a private pension pot of around £290,800, an additional £42,800 compared with April 2022.
Furthermore, a “no frill retirement” now costs £1,400 more a year and will only pay for the essentials needed for living.
These hikes in the cost of retirement living are a result of the impact on the impact of rising inflation.
Don’t miss…
Alice Guy, the head of Pensions and Savings at interactive investor, the dilemma pensioners are in.
She explained: “High inflation over the last 18 months has had a devasting impact on the spending power of people’s pension income, meaning that they need a lot more pension income just to maintain the same spending power.
“It now costs around £4,000 more for a comfortable retirement than in April 2022, due to persistently high inflation. And pensioners will need at least an extra £69,000 in their workplace or private pension pot to achieve that level of pension income.
“For a moderate retirement, pension savers will need a private pension income of around £2,600 more than last year and £42,800 more in their workplace or private pension pot.”
The retirement expert warned of the dangers posed by withdrawing from pension pots early in order to make live easier during the cost of living crisis.
Ms Guy added: “Those with a minimum pension income will need a scary 61 percent more private pension income compared to last year just to keep up the same living standard and more than £23,000 more in their pension pot.
“These kinds of eye-watering sums are simply unaffordable for pensioners, many of whom have a small private pension pot and little option to make more pension contributions.
“The danger is that withdrawing more from your pension pot could have a long-term impact on your pension wealth – withdrawing too much could mean some pensioners run out of money earlier than planned.”
