New research shows that single people face an uphill climb heading into retirement, having to save significantly more proportionately than their couples counterparts in order to enjoy a similar lifestyle.
New analysis by Standard Life has thrown into sharp focus the additional savings that single people need to build up for retirement, compared to pensioner couples who are able to share a raft of costs.
The analysis used the “MoneyHelper” annuity tool to reveal the differences in pension pots needed to secure the PLSA’s “minimum”, “moderate” and “comfortable” standard of living in retirement.
How much you need to save on top of the State Pension
Single retirees who want to achieve a minimum living standard, which includes enough for the basics and one week’s holiday in the UK a year but no car, require an annual income of £12,800, according to the PLSA. Assuming a full state pension (£10,600 a year) is received, a retiree needs an income of £2,300 before tax each year to maintain this standard of living. In order to buy an RPI linked annuity – which is a guaranteed income for life – they would need to have amassed around £53,000 in retirement savings at current rates.
The Living Standards highlight that pensioner couples need an annual income of £19,900 to reach the same standard of living – however this would be covered by two full state pensions meaning they would not need to have accumulated any additional savings to cover a basic retirement lifestyle.
Will YOUR savings be enough for retirement?
For a moderate retirement standard of living, which allows for a car and one two-week foreign holiday a year, the PLSA calculates single pensioners need an income of £23,300 per year. Assuming a full state pension is received, they would need an annuity which provides £14,900 a year, after taking account of income tax. To achieve this, they would need to save around £315,000.
Pensioner couples, meanwhile, need an annual income of £34,000, which they could get if they also amassed £310,000 in their joint pension pot, meaning they would need to save £155,000 each – around half the amount of a single pensioner.
For a comfortable living standard in retirement, which allows for a three-week foreign holiday, a full kitchen and bathroom replacement every 10-15 years and a £1,500 a year clothing and footwear budget, single pensioners would currently need to accumulate a pot of around £675,000, while pensioner couples would need £835,000 between them, or around £418,000 each – meaning a single pensioner would need to save an additional £257,000 to achieve the same lifestyle as a couple.
What lifestyle can you expect in retirement?
Dean Butler, Managing Director for Retail Direct at Standard Life said: “Single people have to front a whole host of expenses on their own – from mortgage or rent payments, utility bills and council tax, to broadband, holidays and TV subscriptions – and unfortunately these aren’t automatically half the amount that couples pay. As our analysis shows, single pensioners need to amass a bigger pension pot to achieve the same standard of living as pensioner couples.
“Knowing the sort of lifestyle you want in retirement will help you plan, and the PLSA Retirement Living Standards tool outlines the savings target that you might need to get there. Consider making top ups to the amount you regularly pay into your pension. Clearly, it’s a difficult economic environment at the moment, but your future self will thank you for taking any opportunity to put money away for retirement.”
Are YOU on target for a comfortable retirement?
If you want to find out exactly how well your retirement financial plans are faring, simply check in with the RetireEasy LifePlan online tool. Feed in your current savings and investments and you will be able to see at a glance in easy-to-understand graphs exactly how much you can comfortably spend in your retirement years. You can also run different scenarios to explore what would happen if (for example) you decide to retire earlier or later than your original plan, help a family member with a deposit for a house or their student fees, or downsize at some point in the future.
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