Under three-quarters of workers are saving enough to enjoy a ‘moderate’ standard of living in retirement, according to a new report by Pensions UK
The annual standards, calculated by the Centre for Research in Social Policy, Loughborough University, now show that a Minimum retirement lifestyle costs £13,900 a year for a one-person household and £22,500 for two people. A Moderate lifestyle costs £32,700 for one person and £45,400 for two, while a Comfortable lifestyle costs £45,400 and £62,700 respectively.
The figures reflect increased everyday costs across spending categories such as food, essential household bills and transport, as well as the social activities and hobbies.
The report expects around 82% of the working population to reach the Minimum standard of living in retirement.
However, this falls to just 23% reaching a Moderate standard and 9% reaching Comfortable.
This is out of step with what some people expect for their retirement. Without higher levels of saving, there is a risk that many will face a significant drop in income when they stop working they say
Zoe Alexander, Executive Director of Policy and Advocacy at Pensions UK, said: “The latest update to the Retirement Living Standards underlines a clear reality for many people, today’s saving levels will not be enough for the retirement they expect. It is expected that around 82% of people reaching a Minimum standard of living, but far fewer will go beyond that.
“That is out of step with what people expect for their future. Without action, too many risk facing a cliff-edge drop in income when they stop work. The Government is right to be considering whether minimum contributions need to rise through the work of the Pensions Commission.
“In the meantime, tools like the RLS play a crucial role by helping people take control and understand what they might need, so they can put more money away where and when they can.
“We also encourage people to speak to their employer and see whether the organisation is prepared to support them to save above the minimum, such as higher rates of matching pension contributions. This could help ‘bridge the gap’ until policy catches up and we see higher savings levels set in legislation.”
