Nearly a third of people previously on track to achieve a “moderate” standard of living in retirement are now facing a “minimum” standard as a result of the economic environment, according to data from Wealth Wizards.
Rising inflation, which has increased the cost of living over the last year, has impacted the expenditure required for retirees to achieve the industry benchmark retirement standards set by the Pensions and Lifetime Savings Association.
The latest figures from the PLSA shows the cost of a minimum standard of retirement has risen 18% since 2021.
A retiree would now need an income of £12,800 a year to achieve a minimum standard of living, up from £10,900.
Meanwhile, those seeking a moderate standard of living will need £23,300, an increase of 12% from previous amounts and those targeting a comfortable lifestyle will need £37,300, up 11%.
Wealth Wizards said its own analysis across 40,000 cases shows nearly 1 in 5 pension holders are not on track for the retirement living standard they would like and 1 in 3 of those previously on track for a moderate lifestyle are now facing a minimum standard of living.
In addition, as many as 1 in 10 who were previously on track to achieve a minimum lifestyle are currently below that threshold, meaning their basic needs will not be met in retirement.
Ben Hampton, CEO of Wealth Wizards, said people are facing a real risk of “sleepwalking” into a retirement that doesn’t meet their desired lifestyle.
Hampton said: “While some people have access to a financial adviser to help address the issue, there are millions of others who don’t because of the costs associated or, unwittingly, they feel their circumstances don’t warrant it. These are exactly the people who would benefit from increased access to advice and more personalised guidance and rightly, the regulatory focus on helping customers at this key life stage is intensifying.”
Hampton said the thematic review of retirement income advice is adding further interest to how customers are supported and the advice/guidance boundary is expected to bring new innovation. However, he warned that the immediate impact of the current economic environment is evident and urged the industry to act.
He added: “As an industry, we must find ways to move forward in offering solutions now for those who don’t want to wait.”
