Published On: Thu, Oct 17th, 2019

Pension: How much retirement costs according to Retirement Living Standards | Personal Finance | Finance

Whether it’s holidays or home improvements, there are many things a person may wish to do during their retirement. But, from savings to pension wealth, it can be a struggle to picture how much living during this time of one’s life will cost. In an effort to help people envisage the lifestyle they want when they retire, and to understand the cost of it, new Retirement Living Standards have been published by the Pensions and Lifetime Savings Association (PLSA).

The new report from Loughborough University and the PLSA describes three different standards of living, pitched at minimum, moderate, and comfortable.

The standards, which are based on the cost of goods and services outside of London, propose a “minimum” lifestyle could cost £10,200 per year for a single person.

For couples, this figure is £15,700.

Currently, the full new state pension is £8,767.20 per year.

Under this lifestyle level, a person could expect to holiday in the UK, eat out about once per month, and do some affordable leisure activities around twice per week.

Meanwhile, the standards say a moderate lifestyle would cost £20,200 a year for singles and £29,100 for couples.

In addition to the minimum lifestyle, costs could include a two-week holiday in Europe, and dining out several times per month.

Experts found that for a comfortable standard of living, a single person would need £33,000 per year.

For couples, the costs for this kind of lifestyle – which includes a three-week holiday in Europe each year – worked out as £47,500 per year.

Figures for those who live in London and the South East were slightly higher.

Nigel Peaple, Director of Policy and Research, PLSA, said: “Goal setting can help people plan and a series of simple standards could transform pensions engagement.

“Nearly three quarters (76 percent) of people believe that Retirement Living Standards would help them to know if they were track for the lifestyle they want in retirement.

“The Retirement Living Standards will support better saver engagement. They distil robust, in-depth research into an easy to understand basket of goods, and relatable figures that can provide a powerful and immediate imperative for encouraging engagement with saving.

“The 5-a-day campaign did a lot to change perceptions about healthy eating. We hope the Retirement Living Standards will transform the way people think about what money they might need for their retirement.

“We want the pensions industry and Government to use these standards to help people save for their future.

“For example, some parts of industry plan to provide the information to their scheme members, some are building tools for savers to track their saving, and others are developing calculators to help support savers to build a personalised target based on the standards.”

Guy Opperman, Minister for Pensions and Financial Inclusion, said: “We have transformed saving for retirement for millions of people and the next challenge is to make it easier for them to engage more with their pensions. It’s great to see what the PLSA has developed which has the potential to help savers think about the future and plan for the retirement they want.”

Jackie Spencer, Senior Policy and Propositions Manager, Money and Pensions Service, said: “Saving for something is easier to do when you can visualise what you’re working towards, which is why people are often more motivated to save for short-term goals like holidays and new cars than they are for their retirement.

“The new Retirement Living Standards are a great way of offering savers some practical examples of what they can expect from their lives when they stop working.

“The Money and Pensions Service has agreed to be an early adopter of the new standards and will be looking to incorporate them into pension guidance and our online pension calculator.”

READ MORE: How much is the new state pension? What is required to get the full amount

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