Comfy retirement? You’ll need a £1 million pension pot as experts reveal how much you’d REALLY have to save for holidays in the Mediterranean, dining out and drinking fine wines
- Pension industry produced a guide on income needed for a retirement lifestyle
- Minimum standard income of £10,200 (£15,700 for couples) will allow pensioners to buy supermarket own-brand products
- Moderate retirement income of £20,200 (£29,100 for couples) will allow a ten-night holiday in Europe every year and fund a second-hand Ford Focus
- Comfortable retirement income of £33,000 (£47,500 for couples) will buy £8 bottles of wine, £300 a month dining out and three weeks a year in Europe
Those who expect to spend their retirement holidaying in the Mediterranean, dining out and drinking fine wines might need to take a long hard look at their savings.
The pension industry has produced an in-depth guide to how much our spending habits and favourite brands will cost in retirement.
By setting out the income needed for a retirement lifestyle, the Pensions and Lifetime Savings Association hopes to encourage us to put more money aside.
The study, by Loughborough University, details everything from the brand of baked beans we might buy to the quality of wine and beer we’ll be drinking.
By setting out the income needed for a retirement lifestyle, the Pensions and Lifetime Savings Association hopes to encourage us to put more money aside
The ‘retirement living standards’ aim to give savers a picture of the kind of lifestyle they might have on a minimum, a moderate, or a comfortable income.
The minimum standard – an income of £10,200 for a single person or £15,700 for couples – will allow pensioners to go on coach trip holidays and buy supermarket own-brand products, but they will not be able to afford to run a car.
A moderate retirement income of £20,200, or £29,100 for couples, will allow a ten-night holiday in Europe every year and fund a second-hand Ford Focus.
And a comfortable retirement income of £33,000, or £47,500 for couples, will buy £8 bottles of wine and fund £300 a month on dining out and three weeks of the year holidaying in Europe.
Annuity rates slumped to a record low last month, meaning a 65-year-old with a £50,000 pension pot will now get an annual income of just £2,237.
This means a couple will need combined pension savings of more than £1million to afford the ‘comfortable’ lifestyle the PLSA said will cost close to £47,500 a year. If both collect full state pensions, then they’ll need a pot of more than £710,000.
Yet the PLSA, which represents more than 1,300 pension schemes, said that even the minimum retirement income allowed enough money for some ‘fun’, including a budget for social occasions.
A comfortable retirement income of £33,000, or £47,500 for couples, will buy £8 bottles of wine and fund £300 a month on dining out (stock image)
Through a combination of the full state pension of £8,767 per year, and auto-enrolment in a workplace pension, this level should be achievable for most.
A 40-year-old with no pension savings, who is due to retire at 68 with a state pension, would now need to put away £790 every month to reach the ‘comfortable’ retirement income of £33,000.
A couple the same age, would together have to be saving around £1,000 a month to hit the £47,500 target.
Nigel Peaple of the PLSA, said he hoped the standards would transform the way people think about retirement saving in the same way ‘five-a-day’ messages changed perceptions about healthy eating.
Jackie Spencer of the Money and Pensions Service, said: ‘Saving is easier to do when you can visualise what you’re working towards, which is why people are often more motivated to save for short-term goals like holidays than for retirement.’
Pensions minister Guy Opperman said: ‘It’s great to see what the PLSA has developed which has the potential to help savers plan.’