A new report has revealed the amount of money individuals and couples will need in order to access different styles of retirement. The Retirement Living Standards report, produced by the Pensions and Lifetime Saving Association (PLSA), has been developed to help individuals paint a better picture of the kind of lifestyle they could have in retirement according to the income they stand to receive.
The publication shows three different levels of retirement – minimum, moderate and comfortable, demonstrating each with a basket of goods and services, ranging from everyday essentials including food and drink to other purchases that may be made on an annual basis, such as holidays.
A ‘minimum’ retirement of income of £10,200 per year for a single person (or £15,700 for a couple), would afford a one week holiday plus a weekend break in the UK every year, eating out about once a month and a £38 weekly food shop. A moderate income of £20,200 a year for a single person (or £29,100 for a couple) provides ‘more financial security and more flexibility’, affording a 2 week holiday in Europe and a long weekend in the UK every year, a £46 weekly food shop and £750 for clothing and footwear each year. In order to experience a ‘comfortable’ retirement with more financial freedom and some luxuries, including regular beauty treatments, two foreign holidays a year and a £56 weekly food shop, an annual income of £33,000 a year (or £47,500 per couple) would be needed.
The full breakdown of the expenses that could be afforded at each level of retirement can be explored in detail here https://www.retirementlivingstandards.org.uk/
The Retirement Living Standards have been developed following previous PLSA research which showed that 51% of people focus on their current needs and wants at the expense of providing for the future and only 23% of people are confident they know how much they need to save.
The report highlights that with the current state pension entitlement and an auto-enrolment pension pot at the minimum contribution level, ‘most people’ in the UK could attain the ‘minimum standard’ of retirement living. When looking at the detail of what this entails compared to what a larger annual income could afford goes some way to help people picture their future retirement.
These findings are a useful way for individuals and couples to benchmark their retirement aims and goals. Although many people save for retirement, they rarely have a clear picture of how much they will need, particularly during the early years of pension contributions. Although the Retirement Living Standards are a useful starting point, in order to find out if you’re on track for the type of retirement you want, it will be necessary to do some further research or consult a financial adviser.
We tend to find that as they get closer to retiring, clients develop a sharper focus on what they want from retirement. Unfortunately, by leaving it until the latter stages of working life, individuals may find that they haven’t left enough time to accumulate savings.
It can be said with some certainty that the earlier saving for retirement commences, the ‘cheaper’ it is – due to the ability for compound interest – reinvesting the proceeds of investments and savings.
For more information on retirement planning, please contact us to speak to one of our Chartered Financial Advisers.