The Pensions and Lifetime Savings Association says the minimum income needed to fund retirement has fallen.
The PLSA publishes annual ‘retirement living standards’ levels to give the public a generalised indication of what income levels they might need in retirement. According to the PLSA’s figures, a minimum annual income level required for a retiree is now £13,400 a year – down £1,000 on 2024 – while for couples it is £21,600, down £800 from last year. The PLSA says this is largely thanks to falling energy costs.
The association models three standard retirement living standard scenarios, including the minimum. For a ‘moderate’ retirement income, single retirees need £31,700 a year, while couple require a joint income of £43,900. These figures have increased by £400 and £800, respectively, on the year before. The income per person is less for couples, as many costs, such as household bills, are shared. In order to live a ‘comfortable’ retirement, single retirees currently need an annual income of £43,900, while couples must earn £60,600. These figures are up £800 and £1,600 respectively on 2024.
Zoe Alexander, director of policy and advocacy at the PLSA, said; “We’re not just seeing changes in costs, we’re seeing changes in how retirees live. Retirement isn’t a one-size-fits-all experience. The Standards recognise that retirees can share costs, often with a partner, and that can make a huge difference to affordability in later life.”
The figures incorporate key lifestyle costs such as holidays and leisure, clothing and personal care and gifts for others. However, they exclude housing costs such as rent and mortgages. Broadly speaking, the PLSA compiles the standards on the basis that most retirees are homeowners.
Why does this matter to me?
Retirement income is an essential aspect of long-term financial planning. These figures are general and designed to help people visualise what they might need in retirement to live different levels of lifestyle. For those for whom retirement is still some way off, it is important to remember that these figures will look different in the future – thanks in large part to inflation. For anyone closing in on accessing pensions and even the state pension, the Standards can provide a useful rule of thumb when considering how they intend to generate a sustainable retirement income.
It is important to work with a financial planner to consider the best approach to maximising your long-term income potential and planning for a financially sustainable retirement.
