What sort of retirement do you want?

Recent studies indicate that a single person needs £14,400 a year as a minimum income in retirement. This rises to £31,300 a year for a moderate income and £43,100 a year for a comfortable retirement.
For couples, who benefit from some shared incomes the requirement is a joint income of £22,400 at the minimum level, £43,100 at a moderate level, and £59,000 at a comfortable level.
The Pensions and Lifetime Savings Association (PLSA) uses evidence from focus groups to make the estimates above and the figures used are intended as a guide for those planning their retirement savings. As we are all different, what we consider moderate or comfortable will vary.
The amounts quoted have risen significantly in recent times. Primarily the result of rising food and energy costs. The calculations are pitched at three different levels – minimum, moderate and comfortable – and are developed and maintained independently by the Centre for Research in Social Policy at Loughborough University.
Under the estimates it is assumed:
- A minimum standard includes around £95 for a couple’s weekly groceries, a week’s holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week.
- A moderate standard increases all the above slightly and includes running a small second-hand car, a week holidaying in Europe and a long weekend break in the UK and the option to help their family members financially with a budget of £1,000.
- A comfortable retirement includes the above plus luxuries such as regular beauty treatments, theater trips and two weeks’ holiday in Europe a year.
None of the calculations include housing costs, because many pensioners have paid off a mortgage, while those who rent may have a benefit entitlement to help them pay.
What will I receive from the state pension?
It is often incorrectly assumed that everyone is entitled to a state pension. However, in reality you have to have earned a specified number of qualifying years on your National Insurance record before you are entitled to a payment. Currently this is a minimum 10 years up to 35 qualifying years for the full new state pension. (for men born on or after 6th April 1951 and women born on or after 6th April 1953).
The new state pension will rise by 8.5% in April 2024 to £11,502.40 a year, assuming that you have built up your full entitlement to this. The state pension is currently protected by what is known as the triple-lock, this is a calculation that is used to uprate the amount of state pension paid, and has acted as a crucial safeguard against rising retirement living costs, researchers said. This figure of £11,502.40 by itself is below the minimum standards being highlighted above for individuals and only just above the required levels for a minimum retirement for a couple, if you are both in receipt of it.

You might have a work place pension?
In addition to the state pension, employees are now automatically enrolled into a pension scheme (assuming certain criteria are met) taking a monthly contribution from both you and your employer and putting it into a pension pot. Although automatically enrolled, employees do have the option to opt-out. A government spokesman said that auto enrolment had “transformed pension saving”. You may now have multiple pension schemes from multiple employers and not understand how these are performing, or even if added together would they provide you sufficient income on top of the state pension to allow you to retire in the manner you would prefer.
How much do you need to save?
The amount an individual needs to save over their working life to reach the levels quoted for their retirement income is a complicated and a highly speculative calculation.
That is because of all the changes that occur over such a long time, the variety of pension options, and lots of other variables.
In very simple terms:
- Someone with a defined benefit pension (often called a final salary pension) will be paid an income at retirement. Each year, as they save, they receive an update on how much pension they are forecast to receive and it is often linked to their pay and how many years’ service they have achieved.
- It used to be common to buy an annuity at retirement. If a single person buys an annuity (a retirement income) when they stop work, they would need to have saved between £40,000 to £70,000 to reach the minimum standard quoted above, according to the PLSA, or between £300,000 to £500,000 for a moderate standard, or £490,000 to £790,000 for a comfortable standard.
- Many people now prefer to drawdown a pension from their invested pot (typically from defined contribution pensions). Under this option, a single person would need savings of £70,000 for the minimum standard, £490,000 for a moderate standard, and £790,000 for a comfortable level, according to investment platform AJ Bell.
The above is based on the topping up to the new state pension mentioned previously. The calculations are based on today’s prices and make a host of other assumptions. For example, annuity rates change, so experts stress this can only be an illustration.
What other sources of income might I have?
Savings that you have build up outside of pensions, that could be used to supplement your retirement provision.
You could look to release the equity from your home (assuming that you owned it outright) to help support your retirement needs, although this is not for everyone and is dependent upon your situation.
You may be left an inheritance which in itself would reduce the reliance upon your pension provision but this is not something people should rely upon as this assumes that there are funds left to inherit after someone passes away.
How can we help?
Here at Blackthorn Financial Services Ltd we are able to help you establish where you are currently and where you would like to be at retirement. We are able to create an effective retirement plan with you that makes the best use of your existing provision, ensuring that you are utilising the relevant allowances and reliefs available to you and we can manage that plan, reviewing it regularly to ensure it works for you now and in the future, based upon the information you give us.
To find out more, please contact us.
The value of pensions and investments can fall as well as rise and you may get back less than you invested.
Your home may be repossessed if you do not keep up repayments on your mortgage.