Retirement living standards offer later life budget guidelines
In the last week, the Pensions and Lifetime Savings Association, along with Loughborough University, launched its Retirement Living Standards.
The standards are designed to help people picture the lifestyle they want when they retire – and understand the cost of that standard of living.
They set out the cost of a basket of goods and services including household bills, food and drink, transport, holidays and leisure, clothing and personal and helping others for three different standards of living – minimum, moderate and comfortable.
The costs of the standards of living are shown below:
|Standard of Living||Single||Couple|
The minimum lifestyle includes a holiday in the UK, eating out about once a month and doing some affordable leisure activities about twice a week.
The moderate lifestyle includes a two-week holiday in Europe and eating out a few times a month.
The comfortable lifestyle includes regular beauty treatments, theatre trips and three weeks in Europe a year.
In previous articles, we have identified that the safe withdrawal rate in the UK is just 2.7%.
If a couple wanted a comfortable lifestyle, you would conclude from this that you would need a pension fund of £1,760,000.
Worse than that…the comfortable lifestyle is for expenditure after tax, so you would need even more than this if your money was in a pension.
Even worse than that, if you live in the South East, is 14% higher than the average for the rest of the country, so you need an extra 14%.
There are plenty of things you can do to reduce the amount you need to save, and a good retirement income plan will squeeze the most out of the money you have worked so hard to build up.
The good news is that:
-You will almost certainly have state pensions, and these are usually enough to cover most of the minimum standard of living.
-Most of us have other guaranteed sources of income in retirement like final salary pensions and annuities.
-You can increase the safe withdrawal rate by taking some simple steps.
-Proper tax planning can mean that you can keep more for yourself, and give less to the government, making it easier to save.
If the thought of needing £1million to retire brings you out in a cold sweat, it’s time to get a retirement income plan.
We can help you to work out how much you need to save and how much you can afford to spend.
The Retirement Living Standards are an excellent tool for those looking forward to stopping work, and we look forward to them being developed and used in the future. It will be particularly interesting to see how the figures are affected by inflation.
More information can be found at https://www.retirementlivingstandards.org.uk/