Depending upon the standard of living you are aspiring to in retirement, inflation in 2022 has added between 11 and 20% to the cost, with implications for the pension pots people will need to save.

According to the latest inflation update of the Pensions and Lifetime Savings Association’s Retirement Living Standards, those on the “Minimum” lifestyle have seen the biggest percentage increase to the cost of their retirement, an almost 20% hike, owing to the higher proportion of their budget going towards the things that have risen the most in price: food and energy.

The “Moderate Retirement Living Standard” saw a 12% rise in costs, while those planning to live to a “Comfortable Retirement Living Standard” will need to adjust their future outgoings by 11%.

The figures are based on independent research by the Centre for Research in Social Policy at Loughborough University, and the Retirement Living Standards describe the cost of three different baskets of goods and services, established by what the public considers realistic and relevant expectations for retirement living. These baskets comprise six categories: household bills, food and drink, transport, holidays and leisure, clothing and social and cultural participation.

The RLS figures quoted here are for the UK, excluding London. Costs within the capital are higher.

The changes to the Retirement Living Standards over the past year and required pot sizes

The cost of a Minimum lifestyle increased from £10,900 to £12,800 – or 18% – for a single person and from £16,700 to £19,900 – or 19% – for a couple. This standard reflects what members of the public think is required to cover a retiree’s needs, not just to survive but to live with dignity – including social and cultural participation. It includes £96 for a couple’s weekly food shop, a week’s holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week. It does not include budget to run a car.

This level should also be very achievable for a single person if they supplement the state pension with income from a workplace pension saved through automatic enrolment during their working life.

The Moderate level increased 12% to £23,300 for a single retiree and by 11% to £34,000 for a couple. The Moderate Retirement Living Standard, in addition to the minimum lifestyle, provides more financial security and more flexibility. For example, a couple could spend £127 on the weekly food shop, have a two-week holiday in Europe and eat out a few times a month.

To achieve this level, a couple sharing costs with each in receipt of the full new state pension would need to accumulate a retirement pot of £121,000 each, based on an annuity rate of £6,200 per £100,000.

At the Comfortable Retirement Living Standard, retirees can expect to have more luxuries like regular beauty treatments, theatre trips and three weeks holiday in Europe a year. A couple could spend £238 per week on food shopping. 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.

To achieve this level, a couple sharing costs with each 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.

Rising prices affect some goods and services more than others

Across all of the standards, the increase in the price of domestic fuel has been the most significant factor in increasing what is needed overall. Between 2021 and 2022, the weekly cost of domestic fuel rose by around 130%.

Increases in the costs associated with motoring at the moderate and comfortable RLS over the past year have resulted in this element of the budgets increasing by 16%.

Importantly, they do not include the cost of housing (mortgage payments or rental costs) because the majority of people are projected to own their own home by the time they reach retirement and many others receive welfare payments to meet rental costs.

One positive that savers can take from the figures is that, at all levels, higher interest rates will help to alleviate the cost pressure of higher prices as savers are able to get more attractive rates on annuities for their retirement pots than in recent years.

The simple way to reconfigure your retirement plans

Taking account for the high levels of inflation we are now experiencing can be readily done using your RetireEasy LifePlan, giving you the peace of mind that you remain on track to retire when you had planned… and on the annual income you aspire to… or give you an early alert to any changes you may need to make.

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