Less than one in 10 people are on track to achieve a comfortable lifestyle in retirement, new figures from Pensions UK have revealed.
A new report from the pensions trade body has warned that savers risk a ‘cliff edge’ drop in income when they stop work, leaving them out of step with what they are expecting when they reach retirement.
The report’s updated Retirement Living Standards show that a minimum retirement lifestyle now 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, calculated by the Centre for Research in Social Policy at Loughborough University, reflect increased everyday costs, including food, essential household bills and transport, as well as social activities and hobbies.
Pensions UK said it expects around 82% of the working population to reach the minimum standard of living in retirement. However, this figure falls sharply to 23% for a moderate standard and just 9% are expected to achieve a comfortable lifestyle.
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.”
Pensions UK suggested people use tools like the RLS to understand what they might need in retirement so they can put more money away when and where they can. Furthermore, the trade body is encouraging people to speak to their employer to see whether they are prepared to support individuals in saving above the minimum.
Professor Matt Padley, co-director of the Centre for Research in Social Policy at Loughborough University, commented: “The RLS are rooted in people’s lived experience and reflect a shared understanding of expectations about life in retirement, shaped by the social, economic and political context of contemporary UK society. They provide a ‘real-world’ starting point for individuals in thinking about the sort of retirement they want, what this might cost, and how they might get there.
“But crucially, the RLS also give us a way of thinking more broadly about the ‘adequacy’ of incomes in retirement, and the role that pensions policy can play in enabling everyone to have a decent, minimum standard of living in retirement.
“We know that many people are not saving enough for retirement, but we also know that for some people it is simply impossible to save any more. By providing a living standards benchmark, the RLS can help us to think through the roles of the State, employers and individuals in ensuring everyone is able to have at least a minimum standard of living in retirement.”
