The cost of is getting increasingly expensive, and many are questioning whether their pots will be big enough to afford a comfortable lifestyle.
The Pensions and Lifetime Savings Association () regularly publishes estimations of how large a pension pot should be to achieve certain standards of living, including minimum, moderate, and comfortable. Its latest findings, released in early 2024, show that the total annual income needed for the different rankings has increased significantly in just one tax year, with those aiming for even a "moderate" retirement needing an annual stream of up to £9,000 more. The latest figures for 2024/2025 are yet to be released. However, savers can use the following as a rough guide of what they might need.
Minimum retirement living standards
According to the PLSA, this is the amount needed to achieve "minimum" living standards, based on calculations from the 2023/24 tax year. These standards reflect simply what is needed to survive and live "with dignity," including a budget for social activities.
- Single person: £14,400 (£15,700 in London) per year
- Couple: £22,400 (£24,500 in London) per year.
These figures are up from £12,800 in 2022/23 for a single pensioner and £19,900 for a couple.
The newer figures include around £95 for a couple's weekly groceries, a week's holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week. The minimum standards do not include a budget to run a car.
If purchasing an annuity, a single person would need a pension pot of between £40,000 to £70,000 (including the state pension) to achieve this.
Moderate retirement living standards
To achieve a "moderate" living standard, which comes in addition to the minimum lifestyle but provides more financial security and more flexibility, people will need:
- Single person: £31,300 (£32,800 in London) per year
- Couple - £43,100 (£44,900 in London) per year.
These figures are up from £23,300 for a single pensioner in 2022/23 and £34,000 for a couple.
For this living standard, a couple could spend around £100 a week on groceries, £60 a week on eating out, run a small secondhand car, have a week's holiday in Europe and a long weekend break in the UK.
If purchasing an annuity, a single person would need a pension pot of between £300,000 and £500,000 (including the state pension) to achieve this. According to the PLSA, a couple would need around £150,000 to £250,000 each.
Comfortable retirement living standards
At the comfortable standard, retirees can expect to have more luxuries such as regular beauty treatments, theatre trips and two weeks' holiday in Europe a year, according to the PLSA. A couple could spend around £130 per week on groceries and £80 a week, per couple, on meals out:
- Single person - £43,100 (£45,000 in London) per year
- Couple - £59,000 (£61,200 in London) per year.
These figures are up from £37,300 in 2022/23 for a single pensioner and £54,500 for a couple.
If purchasing an annuity, a single person would need a pension pot of between £490,000 and £790,000 (including the state pension) to achieve this. According to the PLSA, a couple would need around £280,000 to £450,000 each.
