High inflation and the cost of living crisis has added 18% to the ‘minimum’ cost of retirement, says the Pensions and Lifetime Savings Association.
According to the industry body’s latest Retirement Living Standards update, people on the ‘minimum’ lifestyle have seen the biggest percentage increase to the cost of their retirement, as a result of a higher proportion of their budget going towards food and energy.
The Retirement Living Standards are a set of standards which describe the cost of three different baskets of goods and services, which each comprise six categories: household bills; food and drink; transport; holidays and leisure; clothing; and social and cultural participation.
The cost of a ‘minimum’ lifestyle has increased 18% from £10,900 in 2021 to £12,800 in 2022 for a single person and 19% from £16,700 to £19,900 for a couple.
The ‘moderate’ level increased 12% to £23,300 for a single retiree and 11% to £34,000 for a couple over the course of the year.
Meanwhile, those classified as living a ‘comfortable’ Retirement Living Standard have seen the cost of living increase 11% to £37,300 for one person and 10% to £54,500 for a two-person household.
The annual increase in what is needed to reach each living standard level over the last year marks the largest jump since the Retirement Living Standards were first introduced in 2019. Across all levels, the increase of domestic fuel has been the most significant factor, with the weekly cost of domestic fuel rising by around 130% between 2021 and 2022.
The PLSA said the disproportionate increase in the cost of retirement for those on the ‘minimum’ Retirement Living Standard means the government’s commitment to the state pension triple lock, announced by the Chancellor in his Autumn statement, is especially important. Rising to a record 10.1% to £10,6000 per year, a couple who both receive a full new state pension would reach the ‘minimum’ Retirement Living Standard.
Nigel Peaple, director of policy and advocacy at PLSA, said the challenges of the past year and the impact on retirees underscores its calls for the government to increase the level of automatic enrolment pension contributions in the future.
Peaple said: “Inflation has risen to its highest rate in 40 years with the cost of essentials and domestic fuel soaring, putting substantial pressure on incomes for working age and retired households, particularly those on low incomes. These figures underline why the Government was right to increase the State Pension in line with the Triple Lock in the Autumn Statement.
“The jump in the Retirement Living Standards underscores the need for the Government to adopt the PLSA’s recommendation on pensions set down in our recent report. These include the need for the Government to adopt clear national objectives for retirement income, to ensure the state pension protects everyone from poverty and later this decade, once the cost-of-living crisis has passed, to increase the scope and level of automatic enrolment pension contributions.”
According to the PLSA, a single person would need to spend:
£12,800 a year to enjoy a ‘minimum’ standard of living in retirement (up 18% from £10,900)
£23,300 a year for a ‘moderate’ standard of living in retirement (up 12% from £20,800)
£37,300 a year for a ‘comfortable’ standard of living in retirement (up 11% from £33,600)
