Retirees need around £37,000 annually in 2025, study finds

Shepherds Friendly found that retirees will need £36,915 per year to live on in 2025.

This amount was £25,413 more than the annual state pension, which is around £11,502.

The study suggested that nearly £50,000 will be needed yearly for a comfortable retirement.

Using data on household spending and average mortgage costs, the study provided detailed predictions for various expenses.

Retirees are expected to spend £7,600 annually on mortgage repayments, £3,600 on housing and fuel, £3,530 on food and drink, and £3,392 on transport.

Non-essential spending, like recreation and culture, could be around £3,238 per year, with restaurants and hotel visits costing £1,667.

The research also revealed that retirees, on average, have around £38,000 left on their mortgage at retirement age, resulting in an annual repayment of about £7,600 for a 5-year term.

Basic retirement would cost approximately £31,848 per year, while a moderate lifestyle would require more.

Derence Lee, chief finance officer at Shepherds Friendly, said: “Relying only on a state pension to cover your retirement costs is extremely challenging.

“Most people contribute to a workplace pension, which is automatic for most employees, or open a self-invested personal pension to help save alongside a state pension.

“Whatever the method, the earlier you start saving, the more your investments can grow.”

Lee also highlighted the importance of considering inflation.

Lee said: “Inflation and increased living costs are important considerations when planning your financial security in later life.

“Planning ahead allows you to adjust your savings to meet these rising costs, ensuring that your money lasts and you can enjoy your retirement without worrying about your finances.”

He added: “Frequently reviewing your finances is important to make sure you stay on track with your financial goals, even those beyond retirement.

“Consider where you could cut spending if possible, and consider whether saving any extra disposable income into a pension or savings account will be beneficial.”

Finally, Lee recommended preparing with investments.

He said: “Making your money go further by investing can be key for beating inflation and growing your savings pot over a longer period of time.

“A stocks and shares ISA, for example, can be an extremely beneficial way to save for retirement if you are at least five years away from finishing work due to the better likelihood of earning higher returns in the medium to long run.

“With a stocks and shares ISA, you also won’t have to worry about paying interest or capital gains tax on your earnings.”