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Daily Record
15-07-2025
- Business
- Daily Record
People need an annual income of £44,000 in retirement for comfortable lifestyle
Workplace pensions could give people a better chance of the kind of lifestyle they want in retirement. The minimum amount of money people need in retirement has dropped, amid lower energy prices and people's changing expectations, according to the latest calculations. The Pensions and Lifetime Savings Association (PLSA) sets three different retirement lifestyles - minimum, moderate, and comfortable - to give people a general indication of the kind of lifestyle they may be on track for in retirement. The cash amounts for each standard are regularly updated by the PLSA. This year, the cost of a minimum retirement living standard for a one-person household has decreased by £1,000 per year to £13,400, while for a two-person household, it is £21,600, down from £22,400 a year previously. The changes are mainly due to a substantial reduction in energy costs and some small spending adjustments made to the living standard by research participants, the PLSA said. The minimum standard covers people's basic costs, with some money left over for other expenses including holidays, clothing, cars, dining out. Research discussion groups for the minimum standard reported some small changes in what they need for a minimum standard of living, clothing, hairdressing, technology purchases, taxi use, and charitable giving, although participants agreed that the budget for rail travel would need to rise, the PLSA said. The report said the amounts needed for moderate and comfortable standards have increased slightly, reflecting the impact of inflation across many spending categories being offset by decreases in energy costs. Moderate lifestyle in retirement For a moderate lifestyle, a single person would need £31,700, up by £400 from £31,300 previously, while two people would need £43,900, up by £800 from £43,100 previously. Comfortable lifestyle in retirement For a comfortable retirement, a single person would need £43,900, up by £800 from £43,100 previously, and a two-person household would need £60,600 - a £1,600 annual increase from £59,000. The retirement living standard amounts for 2024/25 were calculated by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA. Across all retirement living standards, weekly domestic fuel budgets had fallen significantly since the previous 2023/2024 update. The standards are a guide to the costs of living in retirement and not fixed savings targets. Zoe Alexander, director of policy and advocacy at the PLSA, said: 'For many, retirement is about maintaining the life they already have, not living more extravagantly or cutting back to the bare essentials. 'The standards are designed to help people picture that future and plan in a way that works for them.' She said that for many people, saving more than the minimum contributions required in their workplace pension could help to give them a better chance of the kind of retirement they want. The PLSA said the role of the State Pension also remains vital, particularly for those at the minimum level. With many people carrying mortgages into later life, the research also underlined the tension between paying off a mortgage and retirement for some households. More than half (58%) of people said they expect to be mortgage-free homeowners by the time they retire, but 17 per cent expect to be homeowners with a mortgage or loan and 8% expect to be renting from a private landlord. Meanwhile, 7 per cent expect to be renting from the council and 8 per cent anticipate that they will be renting from a housing association. And 1 per cent expect to be living 'rent free' in retirement - meaning they anticipate they will be living in someone else's home and not paying formal rent. Professor Matt Padley, co-director of the Centre for Research in Social Policy at Loughborough University, said: 'The consequences of the cost of living challenges over the past few years are still being felt, and we've seen some subtle changes in public consensus about minimum living standards in retirement, resulting in a small fall in the expenditure needed to reach this standard. 'In these uncertain times, planning in concrete ways for the future is ever more important, and the RLS (retirement living standards) help people to think in more concrete ways about what they want their retirement to look like, and how much they will need to live at this level.' PLSA breakdown of people who expect to own their home outright when they retire, without a mortgage: Scotland - 61% Wales - 56% Northern Ireland - 68% North East - 58% North West - 60% Yorkshire and the Humber - 54% West Midlands - 61% East Midlands - 58% Eastern England - 66% London - 53% South East - 56% South West - 56% More than 1,500 people were surveyed across the UK by Yonder in May for the consumer research.
Daily Mail
02-07-2025
- Business
- Daily Mail
Britain's pensions time bomb: Two in five young workers and 62% of self-employed face huge hit to living standards in retirement - because they aren't saving enough
Britain's pensions time bomb was laid bare today amid warnings millions of people face hardship in retirement. Research by the respected IFS think-tank has found 39 per cent of younger private sector workers are not saving enough to avoid big falls in living standards. Some 13 per cent are not even on track for to reach the 'minimum' post-tax income - the equivalent of £13,400 for a single pensioner or £21,600 for a couple. The problems are even bigger among self-employed, with 63 per cent not expected to meet the so-called 'replacement rate' for incomes and 66 per cent not even reaching the basic level. Low-earners are particularly likely to fall short of the minimum retirement funding, with a third not saving enough. But the transition from work to retirement is set to be particularly painful for middle and top earners. Half of those aged between 25 and 34 who are in the higher 50 per cent to 75 per cent of incomes, and paying into defined contribution pots, are set to experience a major drop in their living standards. The Pensions and Lifetime Savings Association (PLSA) defines a minimum standard income as a post-tax income of £13,400 per year for a single pensioner or £21,600 for a pensioner couple. That is after housing costs and based on living outside London. The IFS report recommended that a target should be set for the state pension to be a proportion of earnings, 'to improve predictability'. Currently under the triple lock it rises annually by the highest out of earnings, inflation or 2.5 per cent. It suggested minimum pension contributions by employers should be extended to 'almost all' employees from the first pound of their earnings. Default pension contributions should also be increased when individuals reach the average wage, so that lower earners have their take-home pay protected. The think-tank's review called for a simpler system for self-employed people to build up private pensions. And it suggested a 'small fraction' of the savings from increasing the state pension age should be put towards enhancing universal credit for those approaching retirement. 'Means-tested support for pensioners should be streamlined to boost take-up, and housing benefit should be made more generous for the growing number of pensioners residing in the private rental sector,' the report added. The changes would reduce the proportion of 25 to 34-year-olds projected to miss their income 'replacement rates' by 14 percentage points. Just 6 per cent would fall short of the PLSA minimum retirement living standard, the report estimates. Paul Johnson, Director of IFS and co-Director of the Pensions Review, said: 'There is much to celebrate about the current UK pensions system. 'The current generation of retirees is, on average, doing much better than any previous generation. 'Pensioner poverty is way down on the very high levels in the 1970s and 1980s, and is indeed below that for other demographic groups. The IFS report laid out proposals it suggested would dramatically reduce numbers of workers facing hardship in retirement 'The state pension has been simplified and is now much more generous to many women than in the past. 'Many more employees have been brought into workplace pensions by the successful roll-out of automatic enrolment. 'But there is a risk that policymakers have become complacent when it comes to pensions. Without decisive action, too many of today's working-age population face lower living standards and greater financial insecurity through their retirement.' Former Tory Cabinet minister David Gauke, who helped oversee the review, said: The government should provide a secure pension income, further increases in the state pension age should be accompanied by more support for those hardest hit, and both employees and employers should gradually contribute more to help achieve greater financial security in retirement.'
Yahoo
01-07-2025
- Business
- Yahoo
How much money do you need to retire?
How much should you save for retirement? The answer is it depends on the person. One person might be looking for a retirement full of travel while another wants something altogether more modest. This brings challenges when it comes to setting pension policy and is a problem the government will need to grapple with as it gets ready to announce the second phase of its Pension Review, which will focus on adequacy. It's a piece of work that will inform thinking around the state pension as well as workplace and private provision for years to come. Setting goals too high can mean lower earners potentially oversave into their pension and risk struggling financially today. It could even put them off saving altogether. Setting the bar too low risks higher earners going through life thinking they've done enough and then getting a nasty shock. The Hargreaves Lansdown Savings and Resilience Barometer looked at four key measures of adequacy to see which might help people work out if they are saving enough. These included so-called "pounds and pence measures" which seek to put an actual figure on what retirees need to achieve pension adequacy. Pounds and pence measures include the Living Wage Foundation's Living Pension benchmark which sets an income level to meet basic everyday needs in retirement for single and coupled households. This can be seen as the absolute minimum that someone should be saving for retirement and it sets a target for pension contributions, either as a percentage of salary (12%) or a minimum cash amount (£2,950 for a full-time living wage employee). Read more: Key questions to ask yourself to plan for a comfortable retirement Hargreaves Lansdown also assessed the Pension and Lifetime Saving Association's (PLSA) minimum, moderate and comfortable living standards benchmark for single and coupled household income. The research looked at so-called relative measures, such as target replacement rates, which set an income level in retirement based on pre-retirement earnings. For instance, they may say someone needs to save enough to cover two-thirds of their pre-retirement salary. A specially designed current retirement expenditure measure was also used. This sets an income level in retirement using current retiree spending by income group, relationship status and tenure status. Analysis of these measures found using pounds and pence measures may not reflect of the current living standards of higher earners, so could lull them into a false sense of security. They can also give the impression that lower earners are falling behind, when in reality they don't need to hit higher targets to maintain their current lifestyle. As an example, the PLSA's moderate retirement income standard is set at just over £31,000 per year. There are many people, particularly on lower incomes who can live happily on less than that, whereas a higher earner would probably need far more to maintain their living standards. It's all about what your personal definition of moderate means to you. Relative measures, such as target replacement rates, better account for the ability of households to maintain living standards into retirement. This would see higher earners given a much higher target to hit. For instance, someone targeting two-thirds of their salary in retirement would need an income of £20,000 per year if they were on £30,000 pre-retirement, while their neighbour who was on £60,000 when they were working would need something closer to £40,000 per year. Read more: This under-claimed benefit could help boost your pension After careful analysis, Hargreaves Lansdown believes the best approach is to take a relative measure, such as target replacement rates, as these give a better idea of people's actual income needs in retirement. They can then set their retirement goals based on their experience rather than trying to hit a target that might not work for them. However, we also need to have a minimum income underpin such as the living pension as a bare minimum for what is needed. The key to getting a good outcome in retirement is to keep an eye on how your pensions are performing. Use an online calculator that gives you a sense of how much you are on track for. If it's enough to meet your needs then great, if not you have time to do something about it. Taking steps such as increasing contributions when you get a pay rise and tracking down lost pensions can also play a vital role in getting your retirement planning where it needs to be. Read more: How far will your pension go as retirement costs soar? What is the Pension Investment Review? How to avoid finance scams on social mediaSign in to access your portfolio
Daily Record
24-06-2025
- Business
- Daily Record
Expert provides five finance tips which could add £367,000 to your pension pot
Brits are losing money from their pension pots because of simple mistakes like failing to apply for government credits and low-performing pensions, however, essential tips from a finance expert explain how you can get your money in check. Recent data from the Pensions and Lifetime Savings Association (PLSA) shows that £43,900 is needed annually for a comfortable lifestyle in retirement, yet more than a fifth of Brits feel unprepared for their later years. The PLSA sets three different retirement lifestyles - minimum (£13,400), moderate (£31,700), and comfortable (£43,000) - to give people a general indication of the kind of lifestyle they may be on track for in retirement. To help prepare yourself for retirement, finance expert Antonia Medlicott, Managing Director of Investing Insiders, has shared five things you should do to give yourself a more comfortable lifestyle in later life. Some 41 per cent of employees are not currently contributing to a private or workplace pension, but Antonia's guidance shows there are simple changes that can provide huge gains in retirement pots. Apply for Specified Adult Childcare Credits When a parent gets child benefit, they also get national insurance credits, but if they're working and someone else is doing the childcare, like a grandparent, then those credits can be transferred, which increases your retirement income if you don't have enough national insurance contributions. This little-known UK Government scheme is called Specified Adult Childcare and each year of credit can be worth up to £330 in extra pension income. Over a 20-year retirement, that equates to £6,600. Even better, you can backdate credits to 2011 in the application. The scheme leaves parents worried and asking questions such as 'will this negatively impact my own pension entitlement?', but the great news is that it doesn't, as they are working, which provides them with the national insurance credit anyway. Check your workplace pension A staggering 55 per cent of workplace pensions underperform against industry standards, which could leave workers with an income shortfall when they retire. It's vital to take an active interest in a workplace pension to make sure it's on track for a comfortable retirement. This issue is particularly acute for women, as only 28 per cent know where their pension is invested compared to over half of men (51%). And recent government estimates show that women have 35 per cent less private pension wealth than men. Simply checking a pension regularly (at least once a year) will help workers identify any disappointing returns and take action if they need to change their investment strategy. Open a Self-Invested Personal Pension A Self-Invested Personal Pension (SIPP) allows you to have more control over how your money is invested and is popular due to its tax efficiency; all contributions are tax-deductible, and all growth is entirely tax-free. Making it an effective way to save for retirement. Around 10 per cent of the UK adult population currently hold a SIPP. Statistics over the last decade show that the average self-interest personal pension returns 5.2 per cent per year, compared to a standard default pension, which is between 3-4 per cent. There is a lot of flexibility when it comes to this pension; you can contribute as much or as little as you want. It is also very effective when it comes to estate planning. You can pass on your pension savings to nominated beneficiaries very easily, which gives good peace of mind to know that your money will end up with loved ones. Diversify income sources It's crucial that when you get to your retirement age, you diversify your income sources. Having this will help protect you from pension shortfalls and market volatility. This can be through state pensions, workplace pensions, investments, and personal savings. Each income source gives you an extra level of financial protection, as well as comfort during your retirement. If you combine this with being debt-free, then there's no reason you can't enjoy a stress-free and work-free later life. If you invest £200 a month from the age of 25, by 65 you could have a pot of over £459,000 at an average return rate of 7.5 per cent. But if you start at 35, that pot will be £223,000, and it will be just £98,600 if you start at 45. Debt-free living One of your main aims before retirement should be eradicating or minimising your debt. Particularly debt with high interest, as having to make regular payments on this could take a considerable amount out of your budget. It's also essential to think about your mortgage. If this is paid off before your retirement, then you won't have to worry about accommodation. On average, the UK population spends 35.7 per cent of its annual income on rent or mortgages alone. This will improve your financial flexibility, with that money instead going towards essentials like bills, food, and clothing. Whilst still having enough left over to treat yourself in your later years. Antonia said: 'We often don't want to think about ourselves reaching retirement age. However, assessing the situation now and making small changes, such as checking for childcare credits or how your workplace pension performs, will leave you better prepared when you approach the end of your working life. 'Deciding to start investing a small portion of your monthly income now could leave you with a lot more in your pension pot. That money will allow you to have a more comfortable retirement, or even let you retire earlier than planned.'
The Independent
19-06-2025
- Business
- The Independent
How much you should save in your 20s for a ‘comfortable' retirement
Research indicates that individuals in their 20s need to save nearly £500 monthly to achieve a comfortable retirement, with this amount increasing significantly with age. A comfortable retirement is defined by the Pensions and Lifetime Savings Association (PLSA) as an annual income of £43,900 for a single person, allowing for financial freedom and luxuries. To reach this comfortable retirement by age 65, a target pension pot of £700,000 is considered ideal. Retirement income can be managed through annuities, which provide a lifelong income, or drawdown options, where the pot remains invested with income drawn from it. Experts recommend saving multiples of one's salary at different life stages, aiming for one times salary by age 30 and six times by age 60, though many currently fall short of these targets.
