Pandemic pushes cost of comfortable retirement up by £2,200!

The cost of living in retirement is going up. So, what does that mean for you and your pension pot? Kate Anderson investigates.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Senior woman looking through the window at home

Image source: Getty Images

The Pensions and Lifetime Savings Association has just confirmed what we’ve all been thinking – that because of the pandemic, things are going to cost more when it comes to retirement. A new report from the association shows that couples who want to achieve a comfortable living standard in their retirement are going to have to pay £2,200 extra a year.

[top_pitch]

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

The cost of retirement is climbing higher

It’s hard to dodge all the headlines telling us that the cost of living is increasing. Surging energy prices and rising taxes have meant that everyday expenses are on the up.

But spending habits have also changed in the past couple of years. Retirees want more money for eating out, a higher personal grooming budget and, of course, the all-important Netflix subscription!

So how much more money do we need? The PLSA breaks its retirement standards of living into three levels: minimum, moderate and comfortable. Here’s the breakdown of the PLSA’s suggested annual budget adjustments in 2021.

Minimum Retirement Living Standard

This standard of living includes a week’s holiday in the UK, eating out about once a month and some reasonably priced leisure activities.

The budget for a single person has risen by £700 since 2019 to £10,900. For a couple, it’s increased by £1,000 to £16,700.

Moderate Retirement Living Standard

This is one layer up, adding in a little more financial security and flexibility. So think of a two-week holiday in Europe and eating out a few times a month.

To achieve this, a single person is looking at an annual budget of £20,800 (up £600 from 2019) and a couple will need £30,600 (up £1,500).

Comfortable Retirement Living Standard

This is where those little luxuries like regular beauty treatments and theatre trips come into play. But this living standard also sees the largest jump in costs for a couple.

A single person will need to budget an extra £600 for an annual income of £33,600. However, a couple is looking at £2,200 more at £49,700.

[middle_pitch]

Planning for the future

It can be tempting to push thoughts of your pension to one side, especially if you have other more pressing demands on your money.

But starting early and making a plan for your retirement savings could make a big difference later on in life. So it is important to think about what standard of living you want to achieve when you finally stop work.

Here are some key things to think about:

  • State Pension: First things first, it’s helpful to find out how much State Pension you are entitled to. You can get an estimate using the calculator on the gov.uk website.
  • Pension pots: It’s hard to get a handle on your retirement savings if you don’t know how much you already have. So it could be a good idea to check your pension pots and see what growth trajectory they are on.
  • Plan ahead: Think about how much money you are realistically going to want in retirement. This means you need to think about when you want to retire and how much you want to live on each year.

If you don’t really know where to start, then talking to an independent financial adviser can help.

Unbiased is an online directory that looks to match you with a financial adviser in your area. An adviser can let you know whether you need to make changes to your pension plan in order to achieve the standard of living that you want in retirement.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »