The cost of the minimum retirement lifestyle has decreased to £21,600 per year for a two-person household, due to the impact of lower energy prices and changes in the public’s expectations, according to research by the Pensions and Lifetime Savings Association (PLSA).
Its latest Retirement living standards report by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA, which was based on in-depth discussions with the UK public, also found the cost of a minimum retirement living standard for a one-person household has decreased by £1,000 per year to £13,400. The standards describe the cost of three different retirement lifestyles: minimum, moderate, and comfortable.
The moderate and comfortable standards have risen to £31,700 and £43,900 respectively for one-person households, and £43,900 and £60,600 for two-person households respectively, reflecting the impact of inflation offset by decreases in energy costs.
Meanwhile, a two-person household where both individuals are in receipt of a full new state pension, worth £11,973 per person, or £23,946 combined in 2025/26, will be able to meet the costs of the minimum standard.
Zoe Alexander, director of policy and advocacy at the PLSA, said: “We’re not just seeing changes in costs, we’re seeing changes in how retirees live. The standards recognise that retirees can share costs, often with a partner, and that can make a huge difference to affordability in later life. They are designed to help people picture that future and plan in a way that works for them.
“Automatic-enrolment sets pension contributions at 8%, which is a solid starting point. But for many, saving 12% or more offers a better chance of reaching the retirement they expect. While defaults may rise in the future, it’s important for savers to consider whether 8% will be enough for their goals.
Andrew King, pensions and retirement specialist at Evelyn Partners, added: “It’s worth pointing out that many savers will measure how much they will need in retirement based on the sort of lifestyle they have become used to in their working life. What is clear is that workers must think very seriously about how much they will need in retirement, and even more seriously about how much they are saving right now. Certainly, the base auto-enrolment contribution rates will not be enough for many to have the retirement they want.”
Pete Glancy, head of pension policy at Scottish Widows, said: “There are two ways to improve people’s standard of living in retirement. One is to increase people’s incomes through a larger pension, the other is to reduce living costs. The PLSA has reflected the current short-term reduction in energy costs through into a reduced living costs forecast. Other major living costs include housing and transport. Investing in our infrastructure to deliver long-term reductions in energy, housing and transport costs will go a long way to improving the standard of living experienced by pensioners in the future.”
