Soaring inflation means that retirees need 20% more income to retire on a basic standard of living than last year, according to a new report from the Pensions and Lifetime Savings Association.
The PLSA report says many retirees will have seen their expenditure increase over the last year by almost 20% due to high inflation.
The cost of a ‘Minimum’ lifestyle has increased over the past year from £10,900 to £12,800 – or 18% – for a single person and from £16,700 to £19,900 – or 19% – for a couple.
The Moderate level increased 12% to £23,300 for a single retiree and by 11% to £34,000 for a couple while the Comfortable Retirement Living Standard (which includes the cost of luxuries like regular beauty treatments, theatre trips and three weeks holiday in Europe a year) has risen by 11% to £37,300 for one person and 10% to £54,500 for a two-person household.
The PLSA says the increases highlight the need for pension reform to help more people achieve an adequate income in retirement.
People on the ‘Minimum’ lifestyle benchmark have seen the biggest percentage increase to the cost of their retirement due to a higher proportion of their budget going towards items that have risen the most in price: food and energy.
The report is based on independent research by the Centre for Research in Social Policy at Loughborough University.
The Retirement Living Standards Report describe the cost of three different baskets of goods and services. The baskets comprise six categories: household bills, food and drink, transport, holidays and leisure, clothing and social and cultural participation.
The Retirement Living Standards are regularly reviewed to ensure they keep up with changes in the public’s expectations of what retired households need as well as the changes to prices on the shelves.
The Minimum lifestyle includes £96 for a couple’s weekly food shop, a week’s holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week. It does not include budget to run a car.
At the Minimum Lifestyle lever the PLSA says the State Pension Triple Lock is increasingly important, the PLSA said. To achieve the Comfortable Retirement Living Standard a couple sharing costs and with each in receipt of the full new State Pension would need to accumulate a retirement pot of £328,000 each, based on an annuity rate of £6,200 per £100,000.
Nigel Peaple, director policy & advocacy, PLSA, said: “The jump in the Retirement Living Standards underscores the need for the Government to adopt the PLSA’s recommendations on pensions set down in our recent report, “Five Steps to Better Pensions”.
“These include the need for the Government to adopt clear national objectives for retirement income, to ensure the state pension protects everyone from poverty and, later this decade once the cost-of-living crisis has passed, to increase the scope and level of automatic enrolment pension contributions.”
Emma Douglas, director of Workplace Savings & Retirement at Aviva (and PLSA, Chair), said: “The PLSA targets continue to provide a simple and helpful framework to guide retirement planning. The amounts by which each income level has risen is a timely reminder of the importance of factoring the impact of inflation into retirement planning, to ensure that living standards are maintained throughout retirement.
“Record-levels of inflation mean the cost of retiring, as well as the cost of living, is at an all-time high. Pension pots that might have sustained a target living standard in retirement might now fall short, meaning that today’s retirees might consider rethinking retirement plans.”
