The Pensions and Lifetime Savings Association (PLSA) has published a set of standards designed to help people picture the retirement they would like and have a clear idea of how much money they’ll need.
The new Retirement Living Standards describe the kind of lifestyle people will have on a minimum, moderate or comfortable retirement income, including household bills, food and drink, transport, holidays and leisure, clothing and helping others. The PLSA said the standards were designed to provide a “practical and meaningful starting point” on a saver’s engagement journey.
Research has shown that over half (51%) of people focus on their current needs at the expense of providing for the future and less than a quarter (23%) of people are confident they know how much they need to save.
The PLSA said it would like to see the standards become widely adopted by the pensions industry, used by schemes in their general information for members, annual benefit statements or to develop personalised targets for their members’ pension planning. It wants to see schemes representing 90% of active savers adopt the standards by 2025
In addition to helping savers better understand what their retirement will look like, the standards are also designed to help people better engage with their pension, the PLSA said.
According to the PLSA, the minimum living standard is £10,200 per year for a single person and £15,700 for a couple, while a moderate lifestyle requires pensioners to have an income of £20,200 a year for singles and £29,100 for couples. Those on a moderate income could have a two-week holiday in Europe and eat out a few times a month, according to the calculations.
At the top end of the scale, those on a comfortable level would need £33,000 a year for singles and £47,500 for couples, which would afford them extra luxuries including theatre trips, regular beauty treatments and a three-week holiday in Europe.
Nigel Peaple, director of policy and research, PLSA, said: “The Retirement Living Standards will support better saver engagement. They distil robust, in-depth research with the public into an easy to understand basket of goods that helps people picture the future – and relatable figures that can provide a powerful and practical tool for encouraging engagement with saving.”
Jackie Spencer, senior policy and propositions manager, Money and Pensions Service, said: “Saving for something is easier to do when you can visualise what you’re working towards, which is why people are often more motivated to save for short-term goals like holidays and new cars than they are for their retirement.
“The new Retirement Living Standards are a great way of offering savers some practical examples of what they can expect from their lives when they stop working. The Money and Pensions Service has agreed to be an early adopter of the new standards and will be looking to incorporate them into pension guidance and our online pension calculator.”
