Marvin OnumonuThe Pensions and Lifetime Savings Association (PLSA) has released its latest Retirement Living standards, showing the cost of a minimum retirement has dropped for both single people and couples.
A one-person household now needs £13,400 a year, down £1,000 from last year.
For two people, the annual minimum cost is now £21,600, a drop from £22,400.
For a moderate lifestyle, a single person needs £31,700, up £400 from before.
Couples need £43,900, which is an increase of £800.
For a comfortable retirement, a single person needs £43,900 a year, up £800, while a couple will need £60,600, £1,600 more than last year.
Zoe Alexander, director of policy and advocacy at the PLSA, said: “Automatic enrolment sets pension contributions at 8%, which is a solid starting point – especially if you begin early.
“But for many, saving 12% or more offers a better chance of reaching the retirement they expect.
“While defaults may rise in the future, it’s important for savers to consider whether 8% will be enough for their goals.”
Alexander added: “Everyone’s situation is different, and contributions should be manageable. But if your circumstances improve, even small increases can make a big difference to your future.
“This year’s findings show that costs can go down as well as up. But planning matters more than ever. Whether you’re on your own or sharing your future with someone else, these Standards are here to help savers picture and plan their retirement – with real figures, real choices and real flexibility.”
REACTION:
Sarah Pennells, consumer finance specialist at Royal London:
“The retirement living standards are invaluable in helping people to put a price on how much different lifestyles in retirement could cost them.
“We know that many people are not saving enough to have the lifestyle they would like in retirement, but the updated retirement living standards will help pension savers understand how today’s changing living costs could affect different standards of living in retirement.
“Our workplace pension research shows that, while one in five employees with a workplace pension expect to have a minimum standard of living in retirement, over four in ten are planning on a moderate standard of living with almost four in ten hoping for a comfortable standard of living.
“Understanding the costs of retirement enables people to see how saving into a pension can help them achieve the lifestyle that they want.”
Matt Padley, co-director of the centre for research in social policy at Loughborough University:
“Our research on what the public agree is needed in retirement at these three different levels continues to track changes in expectations, shaped by the broader economic, social and political context.
“The consequences of the cost-of-living challenges over the past few years are still being felt, and we’ve seen some subtle changes in public consensus about minimum living standards in retirement, resulting in a small fall in the expenditure needed to reach this standard.
“In these uncertain times, planning in concrete ways for the future is ever more important, and the RLS help people to think in more concrete ways about what they want their retirement to look like, and how much they will need to live at this level.”
Gail Izat, managing director for workplace and retail intermediary at Standard Life:
“The PLSA’s Retirement Living Standards play a vital role in helping people picture the kind of retirement they want, and what they might need to save to achieve it.
“We know that saving for retirement can seem abstract and overwhelming, especially when people are facing intense financial pressure day to day. Having a clear and relatable benchmark to aim towards is important for people at all stages of life.
“The standards also help us to recognise that retirement costs aren’t equal for everyone. Our recent analysis shows how pensioners in one-person households face a significantly higher savings requirement than those living with a partner in retirement to reach the same standard of living – highlighting the need for personalised planning and support. It’s good to see the standards updated again to reflect the constantly changing world we’re living in.
“The reality is that current minimum auto-enrolment contributions of 8% are unlikely to be enough for most people to achieve the lifestyle they hope for in retirement – our calculations find that someone starting work at the age of 22 and retiring at 68 might need to contribute around 11% for the duration of their career to meet the current moderate standard, including the state pension**.
“Many people are lulled into a false sense of security by thinking that the default contribution levels will deliver the type of retirement they aspire to.
“Ultimately, we need a sustainable roadmap towards higher contributions which we hope the next phase of pensions review will take into account.
“The PLSA standards, alongside other tools like pension calculators and engaging communications, help savers as well as employers and the industry as we work together to support better outcomes.”
