New data has revealed just how much you will need to have an annual income to enjoy a “moderate” lifestyle in retirement.
The new stats are from Hargreaves Lansdown’s “Savings and Resilience Barometer” and put the cost of a moderate retirement income at £25,000 per year for a single person and £36,480 for a couple.
This is a separate methodology from the Pensions and Lifetime Savings Association Retirement Income Standards, which include more aspirational aspects of retirement lifestyle such as extra days out with family. Their figures for a moderate lifestyle are significantly higher (and harder to achieve) at £31,300 for a single person and £43,100 for a couple.
But even under HL’s new methodology, only 38% of UK households are currently on track for a moderate retirement income. They also mean that, after stripping out more aspirational elements, retirement costs have soared by a whopping 34.3% per year for a single person and 26.8% for a couple.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown says: “Developing pounds and pence estimates for what you need in retirement is a hugely useful tool in helping people work out what they need and how close they are to achieving it. [Our figures offer] an alternative to the current PLSA approach where more aspirational areas such as the desire to spend more time with family post-pandemic were added in.
“These things will be important to many, but not all people, and many live well in retirement on far less.”
The PLSA set a “comfortable” retirement income at £43,100 for a single person and £59,000 for a couple. To achieve either of these figures would assume a pension pot in excess of £1 million.
“Even adopting a smaller increase,” continues Morrissey, “exposes the huge challenges people face in planning for retirement. With only 38% of households on track for a moderate income in retirement, there is clearly much work still to be done to improve pension adequacy.”
HL research suggests that making use of available and underutilised funds to secure a retirement income could be the solution for some. “Recent Barometer data shows that 12.2 million households don’t have the pension savings required to retire with a moderate living standard. However, within this group, almost seven million are not behind with debt repayments or bills and have the excess cash or investments that could be used to boost their pensions or SIPPs.”
They say that “It’s a simple shift that could see 1.8m households passing the threshold for a moderate retirement income and securing their financial future.”
So, are YOU on track for a comfortable retirement?
Whatever target you are setting yourself as a retirement income, you can see at a glance if you are on course to achieve that with the RetireEasy LifePlan.
By feeding in your key data, the amount you could safely withdraw each year is presented in easy-to-read charts, enabling you to make informed decisions about your future savings and retirement plans.
If you want to try out different scenarios, now or into the future (such as delaying your retirement, taking out a lifetime mortgage or receiving an inheritance at some point) then it really couldn’t be easier using a tool which offers you professional-quality analysis for just a few pounds a month.
