Experts are calling for urgent pension reform as the amount of income Britons need for a “comfortable” retirement before tax has increased to £59,000 a year.
Previously, retirees would need income of £54,500 if they wanted “more financial freedom and some luxuries” in the later years, according to the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards.
The PLSA says a single person needs an income of £14,400, up from £12,800, for the “minimum” living standard in retirement, which includes a budget of £54 a week on food and one week and a long weekend holiday in the UK each year.
The “moderate” living standard for singles has risen from £23,300 to £31,300. With this income, retirees could have more flexibility, such as a budget of £74 a week on food, two weeks away in Europe and a long weekend in the UK each year.
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Britons will need to have more saved in retirement to live a ‘comfortable’ life
According to PLSA, pensioners will need to have more retirement savings to fall back on as households pay more towards fuel and food, following a surge in the cost of living.
The Retirement Living Standards, calculated by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA, break down the cost of a minimum, moderate and comfortable retirement.
A minimum retirement amount covers all essential needs with money left for some fun, while a moderate sum would provide greater financial flexibility and security.
In comparison, a comfortable retirement amount offers even greater financial freedom and money left over to spend on luxuries.
As part of the PLSA’s Five Steps for Better Pensions report, several recommendations were made on how to increase retirement income.
Among them included a proposal to increase minimum auto enrolment contributions from eight per cent to 12 per cent gradually over the next decade. As it stands, workers pay five per cent of earnings and employers three per cent .
Under the PLSA’s recommendation, contributions would be increased until they match the five per cent paid in by employees.
Furthermore, workers would only be required to put in one per cent extra, with the result that by the early 2030s each will be paying six per cent, totalling 12 per cent.
Here is a breakdown of the minimum, moderate and comfortable retirement amounts pensioners will need to live on:
Minimum Retirement Living Standard
- Income needed for singles in 2023 – £12,800
- Income needed for singles in 2024 – £14,400
- Income needed for couples in 2023 – £19,900
- Income needed for couples in 2024 – £22,400
Moderate Retirement Living Standard
- Income needed for singles in 2023 – £23,300
- Income needed for singles in 2024 – £31,300
- Income needed for couples in 2023 – £34,00
- Income needed for couples in 2024 – £43,100
Comfortable Retirement Living Standard
- Income needed for singles in 2023 – £37,300
- Income needed for singles in 2024 – £43,100
- Income needed for couples in 2023 – £54,500
- Income needed for couples in 2024 – £59,000.
The above RLS figures are for the UK, excluding London, with costs within the capital being higher, according to PSLA.
Professor Matt Padley, a co-director of the Centre for Research in Social Policy at Loughborough University, said: “Expectations about living standards in retirement continue to change in subtle ways.
“The research sets out public consensus about these different living standards with the aim of helping people think in more concrete ways about what they want their own retirement to look like. Their personal retirement goals will be shaped by their own circumstances, needs and preferences.
“In this year’s findings we see the strong effects of rising prices in what’s needed to meet the cost of food and energy.
“Following the Covid pandemic, this latest research highlights a pronounced need and enthusiasm among the public for shared experiences beyond the confines of their homes, including activities like eating out and holidays.”