How much you REALLY need to save to retire comfortably – including holidays abroad
A COUPLE who want a comfortable retirement will need to have an income of £50,00 a year between them, a pension trade body has warned.
The Pensions & Lifetime Savings Association (PLSA) has worked out exactly how much money you need to afford the retirement you want.
The so-called Retirement Living Standards are a guide to help savers work out how much cash they’ll need when they stop working.
They lay out three options, for a minimum, moderate and comfortable retirement.
Each scenario contains a basket of goods that the PLSA tracks the price of, to help people understand how much they’ll need in retirement. They include everything from household bills, food and drink to holidays, clothing and social activities.
But the PLSA has had to update the baskets after the Covid pandemic, to reflect our changing priorities.
More money for eating out, a decent budget for personal grooming, and a Netflix subscription are all top of the priority to list for many people in retirement.
How much money do I need to retire?
The minimum standard covers all of a retiree’s basic needs as well having some money left over for fun.
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It includes a week’s staycation each year, eating out once a month, and some affordable leisure activities twice a week - but no car.
The PLSA says to afford this retirement you would need an annual budget of £10,900 as a single person, and £16,700 as a couple.
That might sound intimidating but it’s important to remember that the state pension will make up part of that income.
The new full state pension will pay £179.60 a week in the 2021/22 tax year, which is £9,339 a year.
How much you actually get will depend on the National Insurance contributions you have made.
The amount needed for this minimum standard has increased by £700 for individuals and £1,000 for couples since the PLSA came up with the guide in 2019.
It said rising public transport costs had driven much of that increase, as well as people wanting to spend more on haircuts and TV streaming subscriptions.
Nigel Peaple, director of policy and advocacy at the PLSA, said: “With barbers and hairdresser closed during lockdowns and many of us taking scissors to our own hair for the first time, it is little surprise that the research groups agreed the budget for personal grooming should be increased.
“The addition of Netflix also gives an insight into what many of us expect to be doing when we finish work.”
For a slightly more extravagant retirement, an individual will need an income of £20,800 a year, or £30,600 for a couple.
The moderate retirement living standard includes a two week holiday in Europe each year and eating out a few times a month.
Around half of single employees are estimated to be on track to achieve a minimum or moderate retirement, with couples more likely to be at the top end of this range.
And for the top tier, the comfortable retirement living standard, the PLSA said an individual would need an income of £33,600 a year, and a couple would need £49,700 between them.
The PLSA said it was likely that only one in six single people would be able to achieve this, but it would be easier for a couple as they can share costs.
The comfortable retirement includes a three week holiday, plenty of money to spend on clothing and more money to spend on social activities such as birthdays.
How to save for retirement
Anyone planning their retirement needs to do some careful calculations about how much they will need to afford the lifestyle they want.
A good starting point is the , which will tell you at what age you will receive your state pension.
can also help you work out how much money you need to be saving to have the pension pot you want at retirement.
The earlier you start saving, the easier it is as your money has longer to grow.
And you’re not on your own when it comes to saving for retirement. Your workplace will most likely contribute some money to your pension pot too, and you get tax relief from the government which reduces the amount you have to pay in yourself.
Tom Selby, head of retirement policy at AJ Bell, said: "For those aspiring to more, higher levels of pension saving will almost certainly be necessary.
"Alternatively, retiring later or working part-time to supplement your pension could help boost your income.
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"But whatever your retirement aspirations, it is worth reviewing how much you save and where you save it.
"If having a moderate or comfortable standard of living in retirement is a key goal, you might need to think about saving a bit more in your pension if you can afford to."
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