Retirement savings gap widens
More people may be falling short of the retirement they expect
A new report from Pensions UK suggests that too many people are heading towards a significant drop in income when they retire, with most unlikely to have saved enough to maintain what is considered a moderate standard of living.
According to the report, a moderate retirement lifestyle now requires an annual income of £32,700 for a single person and £45,400 for a couple. However, only 23% of working-age people are currently on track to reach that level.
The findings highlight the growing challenge of retirement planning as the cost of living continues to increase.
What does retirement really cost?
Pensions UK estimates that the income needed to achieve different standards of living has continued to rise.
A minimum retirement income is now estimated at:
- £13,900 a year for a single person
- £22,500 a year for a couple
The report suggests that around 82% of workers are on course to achieve this level.
For those hoping to enjoy a more comfortable retirement, the figures are considerably higher:
- £45,400 a year for an individual
- £62,700 a year for a couple
Only 9% of workers are currently expected to reach that standard.
Why are the figures increasing?
The retirement income calculations are based on the independently developed Retirement Living Standards produced by the Centre for Research in Social Policy at Loughborough University.
They are designed to reflect the cost of everyday life in retirement, including spending on food, transport, leisure activities and holidays. Housing costs are excluded from the calculations.
According to Pensions UK, higher spending on food and social activities has pushed retirement costs higher over the past year, broadly in line with inflation.
A growing focus on retirement planning
The report has prompted renewed calls for workers, employers and the Government to do more to improve retirement savings.
It also comes as the Government has revived the Pension Commission, which previously led to the introduction of automatic enrolment into workplace pensions.
While automatic enrolment has encouraged millions more people to save for retirement, the latest figures suggest that, for many, current contribution levels may not be enough to achieve the lifestyle they hope for later in life.
Final thoughts
Retirement can feel a long way off, particularly when you're focused on the day-to-day demands of work and family life.
However, small decisions made today can have a significant impact over the long term.
Whether you're employed, self-employed or running your own business, it's worth reviewing your retirement plans regularly to make sure your savings remain on track and continue to reflect your future goals.
If you'd like to discuss your finances or how pensions fit into your wider financial planning, I'm always happy to have a straightforward conversation.
