Happiest retirees need this much in retirement

11 October 2024

UK retirees with £222,000 in their pension pot are the most likely to be happy in their later years, a new report from Legal & General and Danish think tank Happiness Research Institute found.

The findings showed the happiest retirees have an average monthly income of £1,700, equating to a pension pot of £221,858 at retirement and an income of around £20,400 a year.

Despite this, only just over a third (38%) of UK retirees have this level of income or above.

In contrast, one in five (22%) retirees live on less than £1,000 a month, falling below the Pensions & Lifetime Savings Association’s minimum standard for covering essential costs in later life.

The study showed that a key factor of happiness in retirement is financial status, but the boost it brings begins to level off as income surpasses about £2,000 a month.

Other factors driving happiness beyond money were found to be social connections and good health. The survey found that the happiest retirees were also more likely to be satisfied with their day-to-day routines, free time, relationships with family and friends and social lives.

However, achieving financial contentment is not without its challenges, the study showed. More than one in four people (27%) in retirement find their finances unpredictable and hard to keep track of, while a fifth (18%) have found themselves unable to meet the costs of housing, food shopping (20%) and utilities (21%).

Additionally, a third (34%) of retirees have found that financial constraints hinder their ability to socialise.

For young people to achieve the satisfaction levels of today’s happiest retirees, they would need an income of £77,145 and set aside nearly 10% of their income every month from the age of 22 until retirement.

Lorna Shah, managing director at Legal & General Retail Retirement, said: “Our collaboration with the Happiness Research Institute aims to give us a greater understanding of what people truly need to be happy in retirement, so that they can maintain and even improve their wellbeing as they get older. While strong social connections and good health play a vital role in a rewarding retirement, the study shows having a predictable income is key to unlocking the other elements of life that make us happy.

“Young adults today need more support to help them save and secure a more rewarding retirement in the future; a key step in achieving that is an increase in workplace pension contributions. We should also consider the role that other assets, such as property, might play in helping people supplement their pension pots.”

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