More than 8m people live alone in the UK, according to latest figures from the Office for National Statistics (ONS), and the fastest-growing age group living solo is the over-65s.
According to latest figures from the Pension and Lifetime Savings Association (PLSA), you need around £31,300 a year for a ‘moderate’ retirement as a single person, which is significantly more than half the amount needed for a couple, at £43,100. Read more in our articles Can you afford to retire? and How much should I save for retirement?
To achieve a pension pot big enough to provide them with this level of annual income, they would need to save £425 per month in a pension from their mid-twenties until retirement. This includes employers’ contributions, assuming their contributions increase by 2% each year and they achieve 5% investment returns net of investment fees. The later you start saving, the more you need to put away, so if you’re in your fifties, you’ll be looking at some pretty substantial sums which are likely to be unachievable for most.
Here, we look at some of the steps you can take to plan ahead for retirement if you live alone, and ways to maximise the savings you have.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
Check your State Pension entitlement
The State Pension forms the cornerstone of retirement planning for many people, and may be a particularly important part of your income if you live alone. The full new State Pension is currently £221.20 a week or £11,502.40 a year in the 2024/25 tax year, and will rise to £230.25 a week or £11,973 in April 2025. Find out more in our guide How the State Pension works.
You’ll usually receive the full State Pension if you’ve made 35 years’ worth of National Insurance Contributions. If you’re not sure how much you’re likely to get, or want to double check you’re entitled to the full amount as you approach retirement, it’s worth applying for a State Pension forecast. This is an online or paper statement that provides an estimate of how much you’ll receive when you reach State Pension age (you can check your State Pension age here). You can find out more about how to request a forecast and what it’ll tell you in our article How can I get a State Pension forecast?
If you discover that your State Pension is less than the full amount, you may be able to boost the amount you receive by paying National Insurance Contributions (NICs). Buying extra State Pension years involves paying ‘voluntary class 3 NI contributions’, and the rate is currently £907.40 for a full year (£17.45 per week), which will boost your State Pension by around £302 a year (£5.82 a week). Find out how to do this in our guide Is it worth paying to top up your State Pension?
If you’re already receiving your State Pension, check you’re getting the right amount. For example, you may find your State Pension is being underpaid if you’re a widow and your State Pension didn’t increase when your husband passed away, or if you’re a divorced woman receiving a small pension. Find out more in our article Is my State Pension being underpaid?
Consider your income options
If you’re hoping to buy an income for life with some or all of your retirement savings, a single-life annuity is an option you might want to consider. In return for handing over some, or all of your pension savings to an insurer, you’ll be paid a guaranteed income by an annuity provider with the amount of income you’ll receive dependent on factors such as your age and health.
A single life annuity may produce a higher income than a joint annuity that may be bought by a couple, as it won’t need to pay an income to anyone else when you pass away. There are plenty of online calculators that enable you to check how much income you would receive from an annuity in exchange for your pension pot (or what income withdrawals might be sustainable if instead you opt for drawdown in retirement). If you’re looking for flexibility, then drawdown – often known as flexible drawdown or flexi-access drawdown – is a way of taking an income from your pension when you need it. Read more in our article Your pension options at retirement.
Phasing your retirement
Many people, and perhaps particularly those who live alone, worry living costs might mean that retirement is not possible, especially given that the State Pension doesn’t typically provide enough on its own for a comfortable retirement. However, it may help to focus on the fact that the majority of people these days gradually move, or phase, into retirement, perhaps reducing their working hours over several years, slowly freeing up more of their time. This gives you more time to save, and plan for retirement. Read more in our guide How can I phase my retirement?
If you have a defined contribution pension, you can typically access your pension from age 55 (rising to 57 in 2028), making it possible to dip into your pot to supplement your income, while you continue working. However, it’s important to consider the implications of doing this, which are explained in our article Should I use my pension to boost my income?
One of the potential benefits of phasing your retirement is receiving a higher amount in State Pension. By deferring your State Pension for 52 weeks, for example, you will receive an extra £11.78 a week income when you eventually start claiming it. However, this should be a carefully considered decision. You can read more about how this works and the benefits of deferring drawing your pension in our article Eight reasons you might decide to defer your pension.
Living arrangements
If you’ve been living alone for some time, you’re recently divorced and making a new start living solo, or children have flown the nest, you might want to consider downsizing your home. Downsizing is simply when you sell your current home and move somewhere smaller, often to release a lump sum from your home.
However, you’ll need to think very carefully about whether this is the right option for you, as downsizing can be a major upheaval. If you’re worried that it’s not something you’ll be able to cope with at the moment, perhaps because you’ve recently become single or you’ve got other things going on, you might want to put your plans on hold until you feel better prepared. Read more in our article Five questions to ask yourself if you’re considering downsizing your home.
Releasing equity from your home
Equity release is a term usually given to a very specific type of mortgage designed for people aged 55 and over, where you usually don’t make regular ongoing payments. Instead, any interest you owe builds up over time and, as previously mentioned, is only repaid, along with the initial amount of money you’ve released, when you die or go into long term care. Most providers expect the balance to be repaid within 12 months of the last homeowner’s death, or them entering a care home, although some require it to be paid back within six months.
Releasing equity from your home can be incredibly helpful in the right circumstances, but especially if you are single and don’t have dependents you want to leave an inheritance to. For example, the funds released can be used to pay off debts with much higher interest rates; or to simply boost your retirement income if you don’t have other pension arrangements.
Whatever your reasons for considering equity release, it’s important to remember that you are effectively taking money out of your home. While you can continue to live in it, you’ll need to check the small print to ensure that you are comfortable with the rights that any equity release firm will have over your property.
Find out more about equity release in our guide Equity release – what is it and how does it work?
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
Extra income and benefits
If you’re worried about making ends meet in retirement as someone living alone, you should consider whether there might be any ways you could potentially boost your income when you stop working. For example, if you have one, you could think about letting out a spare room to benefit from the government’s rent a room allowance which enables you to earn up to £7,500 in rent a year tax-free. Read more in Renting out a room – what you need to know.
Make sure you’re claiming all the benefits you’re entitled to as well if you live alone or you’re on a low income. These include the single person discount on council tax, which reduces the amount you must pay by 25%. People on a low income or who get the Guarantee Credit element of Pension Credit might be able to get a one-off discount on their winter electricity bill through the Warm Home Discount Scheme if their energy provider belongs to it, and should also be eligible to receive the Winter Fuel Payment which is now means-tested. Find out more in our guide 26 sources of support if you receive benefits or are on a low income.
Build an emergency savings pot
It’s typically considered sensible in retirement to have enough cash savings to cover three months’ worth of essential spending. If you live alone, you may want to have a larger cash pot of up to a year’s worth of expenses. You want to ensure you’re not forced to sell investments when they have fallen because you need the money to pay for an emergency repair, for example.
Even if you know there’s no way you’ll be able to afford to put this much away, it’s always best to try to save something, so that at least you have a bit of money available in an emergency. Find some tips in our guide How to build an emergency fund.
Plan for care costs
If you’re living alone in retirement, you may be concerned about who will look after you if there comes a time when you’re unable to care for yourself. Even if you can rely on family members, it’s important to consider how the cost of care may be funded, if needed. Under current rules, generally, to be eligible for help paying for care, you’ll need to have less than £23,250 in savings, including any income, benefits or pension.
However, there are various ways you might be able to cover care costs if you’re not eligible for financial support, such as pension savings, equity in your home or other investments. You can find specialist help at The Society Of Later Life Advisers, who can run through your care funding options. Read more in How to pay for long-term care.
Make sure you put a Power of Attorney in place so that someone has the authority to manage your affairs and make welfare decisions on your behalf if you’re unable to do this. For example, this may include paying bills, and making medical decisions and choosing a care home. You can appoint family, or friends to this role, or a solicitor to be your attorney if you wish. Find out how to get this done in our article What is a Lasting Power of Attorney and why do you need one?
Finally…
Remember that if you’re aged 50 or over and you have a defined contribution pension, you can get free guidance on your retirement options from the government’s Pension Wise service. However, if you’re seeking tailored advice on your personal situation, you’ll need to speak to a professional financial advisor.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
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