Rising living costs make a “moderate” retirement harder to reach, as new research shows pensioners will need £8,000 more a year to achieve it.
According to a new analysis by the Pensions and Lifetime Savings Association (PLSA), the annual cost of a moderate retirement income for a single person has increased to £31,300 in 2023/24 – up from £23,300 in 2022/23.
The rising cost of living, particularly for food and energy bills, as well as shifting expectations about retirement lifestyles, are behind the increases in retirement costs, the PLSA said.
Even costs for a single pensioner aiming to amass enough to meet “minimum” retirement income standards have increased by nearly £2,000 a year. Costs for a person in this group have risen to £14,400, up from £12,800 in 2022/23.
Andrew Oxlade, investment director at Fidelity International said: “Today’s report from the Pension and Lifetime Savings Association (PLSA) carries some shocking figures.
“It suggests that the cost of ‘moderate’ living standards in retirement has risen by £8,000, or 34 percent in a year. The analysis puts it down to rising energy and food bills but also points to a switch in behaviour with an increase in retired people socialising outside the home post-Covid.
“The analysis underlines just how important it is to begin saving as soon – and as much as possible – during your working lifetime. While some of the factors that determine your financial plans for retirement will be outside of your control, building this pot and planning ahead are things you can influence, and can help you to prepare for unexpected events or a change in circumstances.”
Sir Steve Webb, a former pensions minister who is now a partner at consultants LCP (Lane Clark & Peacock), said the latest estimates “are a wake-up call to Government and the pensions industry alike”.
He said: “Without urgent action, we are likely to see more and more people facing an unenviable choice between an extended working life or a poor retirement.”
Minimum retirement living standards
Here are the minimum retirement living standards for 2023/24, according to the PLSA. The minimum standards reflect what is needed to survive and live “with dignity”, including social and cultural participation.
They include around £95 for a couple’s weekly groceries, a week’s holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week. The minimum standards do not include a budget to run a car:
- Single person: £14,400 (up from £12,800 in 2022/23)
- Couple: £22,400 (up from £19,900 in 2022/23).
Moderate retirement living standards
Here are the moderate retirement living standards for 2023/24, according to the PLSA. The moderate standard, in addition to the minimum lifestyle, provides more financial security and more flexibility.
For example, a couple could spend around £100 a week on groceries, £60 a week on eating out, run a small second-hand car, have a week holidaying in Europe and a long weekend break in the UK:
- Single person: £31,300 (up from £23,300 in 2022/23)
- Couple – £43,100 (up from £34,000 in 2022/23).
Comfortable retirement living standards
At the comfortable standard, retirees can expect to have more luxuries such as regular beauty treatments, theatre trips and two weeks’ holiday in Europe a year, according to the PLSA. A couple could spend around £130 per week on groceries and £80 a week per couple on meals out:
- Single person – £43,100 (up from £37,300 in 2022/23)
- Couple – £59,000 (up from £54,500 in 2022/23).
A Government spokesperson said: “Automatic enrolment has succeeded in transforming pension saving – and we are supporting proposals to expand this even further, enabling millions to save more, earlier.
“We also made the biggest State Pension cash increase in history last year and are delivering a further increase of 8.5 percent in April, as well as boosting Pension Credit and making more than 11.9 million Pensioner Cost of Living payments to help with essential costs this winter.
“We have also more than halved inflation to help everyone’s money go further while providing on average £3,700 per household in cost of living support – one of the most generous in Europe.”
