Rising prices adding to retirement costs
It can be difficult to understand what funds you’ll need to finance the retirement you dream about and how this compares to your projected pensions income. It’s even harder to keep track when the cost of living is spiralling.
The Pensions and Lifetime Savings Association (PLSA, 2023) developed its Retirement Living Standards to help us to picture what kind of lifestyle we could have in retirement at different levels and what a range of common goods and services would cost for each level. The cost of a Minimum lifestyle for a single person has increased from £10,900 in 2021 to £12,800 in 2022, a rise of 18%. For a couple, an income of £16,700 required in 2021 rose to £19,900 (19% increase). Costs factored into this lifestyle include – £96 for a couple’s weekly food shop, eating out about once a month, a week’s annual holiday in the UK and some affordable leisure activities about twice a week. But there is no budget to run a car.
Want more than the minimum?
At the Comfortable Retirement Living Standard, retirees can expect more luxuries like regular beauty treatments, three weeks’ holiday in Europe each year and theatre trips. The weekly food shop for a couple in this lifestyle amounts to £238 per week. At this level, the cost of living increased 11% to £37,300 for one person and 10% to £54,500 for a two- person household.
How much do I need to save?
For a comfortable retirement PLSA estimate that a couple who are both in receipt of the full new State Pension would need to accumulate a retirement pot of £328,000 each, based on an annuity rate of £6,200 per £100,000.
Your lifestyle, your choice
If you’re concerned about your retirement planning we can help you prepare for the
lifestyle you want to enjoy. Retirement planning involves visualising your key goals for your retirement years and setting up a plan to help you achieve those goals through financial planning.
The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates, and tax legislation.