How much do you need to retire?

Living expenses have risen by 20% in the last year for people hoping to achieve the most basic level of lifestyle in retirement, according to the latest figures published in the Retirement Living Standards (RLS).

The Retirement Living Standards show how much income would be needed to achieve ‘minimum’, ‘moderate’ or ‘comfortable’ lifestyles in retirement, and were recently updated in response to rising inflation and the increased cost of living.

As a result, the yearly income required for the ‘moderate’ living standard went up by 12% to £23,000. The ‘comfortable’ standard increased by 11% to £37,000. And the ‘minimum’ living standard saw the biggest increase, leaping from £10,900 to £12,300, following a 20% year-on-year rise in expenditure

Retirement Living Standards

The RLS were introduced by the Pensions and Lifetime Saving Association in 2019 after research revealed that 77% of people didn’t know how much income they’d need in retirement. They’re designed to help people make informed decisions about how much they need to save and are calculated on the cost of everyday expenses, from birthday gifts and toiletries, to taxi trips and clothes.

This is how they look following the January 2023 updates.

Minimum lifestyle: this covers the essentials with some left over for fun, including one UK holiday a year, eating out about once a month, and one or two affordable leisure activities a week.

  • a single person would need £12,800
  • a couple would need £19,000

About three-quarters of people who have a workplace pension are likely to achieve this band.

Moderate lifestyle: this lifestyle offers more financial security and flexibility, one foreign holiday a year, eating out a few times a month, and the chance to do more of the things you want.

  • a single person would need £23,300
  • a couple would need £34,000

Around half of the employees with a workplace pension are projected to achieve between minimum and moderate lifestyles.

Comfortable lifestyle: this provides more financial freedom and some luxuries, like two foreign holidays a year, a subscription to a streaming service, and regular beauty treatments.

  • a single person would need £37,300
  • a couple would need £54,500

About one employee in six is projected to achieve somewhere between moderate and comfortable incomes.

Expenditure has increased by 20% year-on-year for retirees in the ‘minimum’ level of income.

Which Retirement Living Standard will you achieve?

Try our Retirement Living Standards quiz to explore your ideal retirement and how much income you might need to achieve it. Then try our pension savings tool to calculate if your savings are on track and some of the steps you can take if they’re not.

Could you contribute more?

Rising inflation and the increased cost of living mean some people will want to reassess how much they’re putting away for retirement. But saving into a pension ultimately comes down to affordability, so it’s worth checking your pension regularly to see if you can afford to pay in more.

And, if you increase your contributions, your employer might increase theirs too, which can be a great way to boost your savings.

51% of savers think the minimum auto-enrolment contribution is enough.

Article Source: Pension and Lifetime Savings Association: why do we need the Standards