What’s the cost of a comfortable retirement?

At a glance

• We now have more choices, more information and more personal accountability for our retirement income. But will the future we look forward to be one we can afford?
• The Retirement Living Standards, launched by the Pensions and Lifetime Savings Association (PLSA), helps provide a budgeting benchmark for three different standards of living: minimum, moderate and comfortable.
• If you’re planning your retirement lifestyle, these living standards are a practical starting point for anyone unsure about whether they need to save more for their retirement.

Whether you’ve got 20 years before you retire or just a few, it’s important to have an idea of just how much money you’ll need for a comfortable lifestyle once you stop earning a regular salary.

How much money do I need to retire?

Helpfully, the Pension and Lifetime Savings Association predicts approximately how much individuals and couples will need in their pension pot, to have a comfortable, moderate or minimum standard of living in retirement.

The important thing to be aware of is, these figures have increased in the past 12 months. The PLSA’s latest figures, released in February 2024, show that a single person will now need £14,400 a year to achieve the minimum living standard, a rise of £1,600. They would need £31,300 a year for moderate, and £43,100 a year for a comfortable lifestyle, which includes a two week holiday in Europe and several UK mini breaks. For couples, the price tag of these three lifestyles is £22,400, £43,100 and £59,000 per annum.¹

The minimum living standard covers most people’s basic needs. For example, you could holiday in the UK, eat out about once a month and spend around £600 on clothes and footwear a year. But don’t expect to run a car.

The moderate lifestyle provides, in addition to the minimum lifestyle, more financial security and increased flexibility. For example, you could take a two-week holiday in Europe and eat out a few times a month. And you could afford to run a small car.

At the comfortable level, you could enjoy some luxuries like regular beauty treatments, theatre trips and at least two weeks in Europe a year.

By putting a ballpark figure on actual lifestyle choices the PLSA aims to help people develop their own personal savings goals based on their individual circumstances and expectations. Having a concrete goal based on things you enjoy doing, such as holidaying, or eating out with friends, is a powerful psychological motivator to keep saving.

Whatever stage you’re at on your saving journey, having a specific income in mind can help you focus on the end goal – and look forward to it!

Your pension income reality check

Many people may be shocked to learn how little income their savings will provide. Which is why it’s vital to realise the power of ‘saving sooner rather than later,’ and not simply hoping for the best.

Assuming you qualify for the full annual State Pension of £11,502 (2024/25), the PLSA says you’ll still need to build up a pension pot worth more than £590,000 to achieve a comfortable retirement1. This is if you want to turn your pension into an annuity, which pays you a guaranteed annual income for life in retirement.

The good news is that a combination of the full State Pension and auto-enrolment in a workplace pension, most people should be able to look forward to the PLSA’s minimum level of retirement.

However, a modest contribution level is unlikely to be enough to get you over the line between the PLSA’s minimum and moderate lifestyle standards. That’s why leaning in to the process, and starting to make proactive financial plans for your later years while you’re still working could – literally – pay dividends.

Have some questions? Talk to us

Whether it’s a three week holiday of a lifetime, escaping to the country, or simply being able to visit family and friends whenever you like, having those specific retirement goals to save for can really help you focus. Plus, it’s exciting to think what lies ahead after that last day in the office. Financial advisers can give you an idea of what your retirement income will be, based on how much you’re saving. You can also discover how much money you need to save for retirement or use our pension calculator to find out how much you need to save to fund the lifestyle you want.

We all deserve a comfortable retirement. And planning your longer-term finances now will make you feel confident and in control of some of the best years of your life.

Get in touch today so we can help you enjoy the retirement you deserve.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

Auto-Enrolment products are not regulated by the Financial Conduct Authority.

Source

¹Retirement Living Standards, Pensions and Lifetime Savings Association, 2024. All figures quoted were developed by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA.