The annual cost of enjoying a moderate standard of living in retirement has risen by £8,000 in a year, according to the pensions industry body.
The Pensions and Lifetime Savings Association (PLSA) put the yearly price of a retirement income deemed “moderate” for a single person at £31,300 for 2023 to 2024 – up from £23,300 a year earlier.
The increase has come due to the rising cost of living – as food inflation and energy bills remain high – and higher expectations about retirement lifestyles.
A “moderate” level of retirement means retirees can afford a monthly meal out and financially help family members with a budget of £1,000.
Costs rose for a “comfortable” level of retirement but the rise was less sharp as research groups said a couple would need only one small second-hand car rather than two cars, which had been seen as needed to retire comfortably in previous years.
The retirement living standards are calculated by the centre for research in social policy at Loughborough University on behalf of the PLSA.
The pandemic is behind an increased desire for socialising expenditure in pension age.
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“Following the COVID pandemic, this latest research highlights a pronounced need and enthusiasm among the public for shared experiences beyond the confines of their homes, including activities like eating out and holidays,” said Professor Matt Padley, co-director of the centre for research in social policy at Loughborough University.
It follows the publication of the state pension age and demographic change report saying the UK state pension age will have to rise to 71 for middle aged workers.
To have a “minimum” retirement standard, as judged by the research, a single person would need to put away an average of £14,400 every year, up an extra £1,600 from £12,800 a year earlier.
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This living standard includes 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.
A couple hoping to attain the “moderate” pension needs to bank £43,100 a year, up from £34,000 in 2022 to 2023.
In this category a couple could spend around £100 a week on groceries, £60 a week on eating out, run a small second-hand car, have a week holidaying in Europe and a long weekend break in the UK.
Those looking to retire with a “comfortable” living standard, including regular beauty treatments, theatre trips and two weeks’ holiday in Europe a year, need to put aside £43,100 annually, for a single person (up from £37,300 a year earlier) or £59,000 a year for a couple, an increase from £54,500 12 months prior.
The state pension, and the forthcoming 8.5% increase to just over £11,500 per year from April, continued to be a substantial foundation of retirement income, the study said, and this was a reason median average earners could achieve most aspects of the moderate level.