Cost of comfortable retirement surpasses £60k a year

Yahoo

2 days ago

A comfortable retirement in Britain now costs more than £60,000 a year for couples and £43,000 for singles, new research suggests.
The annual Retirement Living Standards, released by the Pensions and Lifetime Savings Association (PLSA), show that the cost of all but the most basic retirement has increased over the past year.
Two retirees running one small car, eating out weekly and taking a four-star foreign holiday each year would need an income of almost £35,000 each before tax to retire comfortably in 2025, rising to £52,000 if they live alone.
Meanwhile, anyone living alone on the state pension would even fall short of a basic retirement of £13,400, as millions anxiously wait to see whether Labour will reinstate their winter fuel payment.
The PLSA released its annual benchmarks on the cost of retirement based on interviews with members of the public.
They outlined the income required for a comfortable, moderate and minimum retirement after tax, but without any housing costs.
The cost of a comfortable retirement has increased from £59,000 to £60,600 a year for couples and includes a weekly restaurant meal, a generous clothing budget and a two-week holiday in the Mediterranean. It also provides money for birthday gifts, running a car and maintaining a property.
Two retirees will need to earn £22,750 each before tax on top of the full state pension, which requires a pension pot of up to £460,000.
The moderate retirement, which costs £43,900 for couples and £31,700 for singles, includes the same elements on a lower budget. Two people on the full state pension would both need £12,300 more a year before tax and a pension pot of up £250,000, rising to £24,500 and £490,000 for a single person.
The minimum retirement costs just £21,600 for two people or £13,400 for someone living alone, a fall of £1,000 compared to last year after a reduction in energy bills.
However, it only provides a basic clothing budget, one week-long UK holiday, no car and a monthly restaurant meal. A full state pension of £11,973 would cover the cost for couples, with an extra pre-tax income of £1,600 needed for singles.
Zoe Alexander, of the PLSA, said: 'These standards aren't supposed to be targets, they're real life examples of needs in retirement. They're designed to help you think about the kind of lifestyle you want in retirement and tailor what you save to that.
'We think the majority of people of working age are, at 8pc under auto enrolment rules, under-saving for retirement and there's a significant risk that many won't reach the standard of living they expect.'
However, the standards do not include housing costs. Experts have consistently warned that many people are not saving enough for retirement and will still be renting when they get there.
According to Scottish Widows, 15.3 million people currently save into a defined contribution pension and 20pc of them are heading towards poverty in retirement.
It also found that around 3.5 million current pension savers will face housing costs in retirement of £10,600 a year on average – potentially doubling the country's housing benefits bill.
Helen Morrissey, of wealth manager Hargreaves Lansdown, said: 'These standards are a useful rule of thumb, but retirement is different for different people. Some are going to want to travel and be out and about quite a lot, while others will want something a bit more modest.
'They are quite useful in the context that it makes you think about what you want your retirement to look like and how much that might cost.
'However, they don't include things like rental costs and this is really difficult because we're going to see more and more people approaching retirement with rental costs. Many people also aren't saving enough and they risk getting a nasty shock if they don't check their pension throughout their working life.'
Labour announced last July that the winter fuel payment would be removed from around 10 million pensioners. However, the Government was forced into a U-turn last month and is now expected to confirm which pensioners will have the benefit reinstated.