Every year the Pensions and Lifetime Savings Association (PLSA) calculate how much money is required for a minimum standard of retirement. According to their latest report, you’ll need £1000 less, due to a drop in the overall cost of energy compared to last year.
That equates to an annual income of just:
- £13,400 for a one-person household
- £21,600 for a two-person household
What are the three PLSA Retirement Living Standards?
The PLSA calculate for three levels of retirement: minimum, moderate and comfortable.
- Minimal is just that: covering the basics and leaving very little to play with. These calculations assume you live a very frugal lifestyle, so you don’t have a car, for example, and eat out to the tune of £30 per month (yes, per month).
- Moderate is more realistic in my view, including a car, more dining out, one 3-star Med holiday and more on gifts for others.
- Comfortable is far better in terms of maintenance on your home and travel abroad, and money for activities during each month.
Are the better retirement living standards costing less too?
Sadly not. Whilst the costs for the minimum level have dropped this year, for the two better standards of living in retirement, you’ll actually need more than last year.
Moderate retirement lifestyle
- £31,700 for a single person, up by £400
- £43,900 for two people, up by £800
Comfortable retirement lifestyle
- £43,900 for a single person, up by £800
- £60,600 for two people, up by £1,600
According to Pensions Age magazine:
“The PLSA credited the decrease in the minimum standards to the impact of lower energy prices and changes in the public’s expectations for this standard, while the rise in moderate and comfortable standards was influenced by inflation in various spending areas, but this was balanced out by the drop in energy costs.” (3)
Why the PLSA figures don’t include housing costs
It’s important to bear in mind that housing costs are NOT included in these figures. The PLSA report assumes pensioners have paid off their mortgage, or are receiving benefits to help pay their rent. For up-and-coming generations of retirees, this is less likely to be true.
“About 56% of those aged between 35 and 54 expected to own outright by retirement age, compared with 68% among those aged 65 and over … Banking trade body UK Finance said first-time buyers were borrowing through mortgages that lasted an average of 31 years, compared with 28 years a decade ago.” (2)
No time for complacency
The costs of the minimum retirement should be covered by your state pension, but a better standard of retirement will require up to an additional £35,000 per year. Many may not realise it and as a result, according to AJ Bell’s director of public policy:
“The big danger here is that, without a scaling up of minimum contributions, millions of people will sleepwalk into a retirement shock and be forced to choose between working longer or living on less money in their later years.” (3)
Retirement planning – the holistic view
Two quite alarming stats from this research shows that:
- 74% say they have carried out only “a little” or “no” retirement planning
- 82% do not know how much they need to maintain their current standard of living in retirement
You should not try to match or compare against ‘the average’ as your lifestyle is very personal to you. Doing the work now to understand your numbers is essential.
What the PLSA report does show is how comprehensive retirement planning needs to cover all aspects of lifestyle, from essentials such as food to ‘extras’ such as holidays and socialising.
In our retirement planning coaching sessions, I actually cover eight different areas of retirement, only one of which is financial! It’s important to include the stuff that makes your retirement both enjoyable and purposeful, such as a social life, health and fitness, and contributing in a meaningful way to your community.
In other words, it’s the difference between getting up each morning and wondering how to fill your day, or fulfilling each day’s (and your) potential. You can have all the money in the world, but without a plan and a purpose for your retirement, you’ll never really make the most of it.
To find out more about better retirement planning, book your free initial 30 mins Discovery session where we can discuss your ambitions and goals for retirement, and chat through where you are right now.
About the author
Paul Hammond is an experienced retirement planner, financial and estate planner, family man and keen wildlife photographer. He is a Certified Retirement Coach with The Retirement Coaching Association and a Member of the Society of Will Writers (MSWW). For more details see https://www.pantheralife.co.uk/meet-paul .
