You need an annual income of at least £10,900 to achieve a minimum standard of living in retirement, according to pension experts, rising to £16,700 for couples (both figures after tax).

This would generally consist of a full state pension of £9,339 a year, with the rest made up by workplace pension savings.

The new figures, released by the Pensions and Lifetime Savings Association (PLSA) mark a rise since 2019 of £700 for a single person and £1,000 for a couple, with the association now factoring in services such as haircuts and Netflix subscriptions. The figures have been amended following the pandemic to take account of changing priorities.

The Centre for Research in Social Policy at Loughborough University keeps track of the figures for three different standards of retirement living: minimum, moderate and comfortable. The minimum standard covers basic needs such as groceries and home maintenance, as well as the occasional treat or social activity, such as eating out, gift-giving, and taking a short UK holiday. It does not factor in the cost of owning a car, however. It also does not account for the cost of rent or paying back a mortgage, as most of the population close to retirement are still expected to be free of these in the next few years.

The estimated budget for a moderate and also a comfortable standard of living have increased too: the PLSA now places the income you’ll need for a moderate living standard at £20,800 per year for a single person and £30,600 for a couple. For a comfortable standard of living, these figures sit at £33,600 for a single person and £49,700 for a couple.

The new moderate and comfortable living estimates increase the budget for basic needs, add longer holidays abroad, and include the costs of owning a car. Full tables outlining these lifestyle expectations are provided below.

  MINIMUM MODERATE COMFORTABLE
SINGLE £10,900 a year. £20,800 a year. £33,600 a year.
WHAT STANDARD OF LIVING COULD YOU HAVE? Covers all your needs, with some left over for fun. More financial security and flexibility. More financial freedom and some luxuries.
HOUSE DIY maintenance and decorating one room a year. Some help with maintenance and decorating each year. Replace kitchen and bathroom every 10/15 years.
FOOD & DRINK A £41 weekly food shop.  A £47 weekly food shop.  A £59 weekly food shop.
TRANSPORT No car. 3-year old car replaced every 10 years. 2-year old car replaced every 5 years.
HOLIDAYS & LEISURE A week and a long weekend in the UK every year. 2 weeks in Europe and a long weekend in the UK every year. 3 weeks in Europe every year.
CLOTHING & PERSONAL £460 for clothing and footwear each year. £750 for clothing and footwear each year. £1,000 – £1,500 for clothing and footwear each year.
HELPING OTHERS £10 for each birthday present. £30 for each birthday present. £50 for each birthday present.
  MINIMUM MODERATE COMFORTABLE
COUPLE £16,700 a year. £30,600 a year. £49,700 a year.
WHAT STANDARD OF LIVING COULD YOU HAVE? Covers all your needs, with some left over for fun. More financial security and flexibility. More financial freedom and some luxuries.
HOUSE DIY maintenance and decorating one room a year. Some help with maintenance and decorating each year. Replace kitchen and bathroom every 10/15 years.
FOOD & DRINK A £67 weekly food shop.  A £74 weekly food shop.  A £94 weekly food shop.
TRANSPORT No car. 3-year old car replaced every 10 years. Two cars, each replaced every five years.
HOLIDAYS & LEISURE A week and a long weekend in the UK every year. 2 weeks in Europe and a long weekend in the UK every year. 3 weeks in Europe every year.
CLOTHING & PERSONAL £460 per person for clothing and footwear each year. £750 per person for clothing and footwear each year. Up to £1,500 per person for clothing and footwear each year.
HELPING OTHERS £10 for each birthday present. £30 for each birthday present. £50 for each birthday present.

Source: PLSA

Why has the estimated retirement budget increased?

Nigel Peaple, director of policy and advocacy at the PLSA, hoped that the new numbers would “encourage people to think about whether they are saving enough for the retirement lifestyle they want and, in particular, whether they are making the most of the employer contributions on offer in their workplace pension”.

Peaple cited the pandemic as a crucial factor in the increased numbers. He said: “With barbers and hairdressers closed during lockdowns and many of us taking scissors to our own hair for the first time, it is little surprise that the research groups agreed the budget for personal grooming should be increased across the three standards.

“The addition of Netflix also gives an insight into what many of us expect to be doing when we finish work”.

The PLSA estimated that around half of single people would be able to achieve a lifestyle somewhere between “minimum” and “moderate”.

Tom Selby, head of retirement policy at AJ Bell, said: “While for many people a total retirement income of between £11,000 and £21,000 per year might be enough to fund their planned lifestyles, a minimum to moderate living standard will inevitably be far below the expectations of others.

“For those aspiring to more, higher levels of voluntary saving above the automatic enrolment minimum of 8% will almost certainly be necessary.

“Higher contributions, particularly in the early years of saving for retirement, can benefit from extra compound growth over the long-term, with an additional boost provided by tax relief and in some cases matched employer contributions.

“Whatever your retirement aspirations, it is worth reviewing how much you save and where you save it. If having a moderate or comfortable standard of living in retirement is a key goal, you might need to think about saving a bit more into your pension if you can afford to”.

Find out more in our guide How much should I save for retirement?

Do you have enough saved in your pension for the retirement lifestyle you want? Do you think the new costs are necessary? We’d be interested in hearing from you. You can join the money conversation on the Rest Less community or leave a comment below.

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