Single retirees who want to achieve a minimum living standard, which includes enough for the basics and one week’s holiday in the UK a year but no car, would require an annual income after tax of £14,400 according to the PLSA. Assuming a full state pension (£11,502.40 a year) is received, a retiree needs an income of £3,355.10 before tax each year to maintain this standard of living. To buy an RPI linked annuity - which is a guaranteed income for life - they would need to have amassed around £75,000 in retirement savings at current rates. In comparison, pensioner couples need an annual income of £22,400 to reach the same standard of living, however this would be covered by two full state pensions meaning they would not need to have accumulated any additional savings to cover a basic retirement lifestyle.
The MoneyHelper annuity tool was used to reveal the pension pots needed to secure the PLSA’s ‘minimum’, ‘moderate’ and ‘comfortable’ standard of living in retirement.
For a moderate retirement standard of living, which allows for a car and one two-week foreign holiday a year, the PLSA say single pensioners need an after-tax income of £31,300 per year. Assuming a full state pension is received, they would need an annuity which provides £24,480.10 a year, taking account of tax. To achieve this, they would need to save around £555,000. Pensioner couples, meanwhile, need an annual income, after tax of £43,100, which they could get if they also amassed £555,000 in their joint pension pot, meaning they would need to save £277,500 each – half the amount of a single pensioner, assuming two full state pensions being received.
For a comfortable living standard in retirement, which allows for a three-week foreign holiday, a full kitchen and bathroom replacement every 10-15 years and a £1,500 a year clothing and footwear budget, single pensioners would currently need to accumulate a pot of around £890,000. Pensioner couples would need £985,000 between them, or £492,500 each – meaning a single pensioner would need to save an additional £397,500 to achieve the same lifestyle as a couple.
Retirement savings needed for single pensioners and pensioner couples to secure an annuity – guaranteeing an income for life:
* Figures assume retirement at the age of 66, single life annuity, no guarantee, paid monthly in arrears, linked to RPI, non-smoker with no underlying health conditions. Account for tax free income up to Personal Allowance and then income taxed at 20%. More detail in notes.
Dean Butler, Managing Director for Retail Direct at Standard Life said: “Whether single by choice or by circumstance, single people must front a whole host of expenses on their own – from mortgage or rent payments, utility bills and council tax, to broadband, holidays and TV subscriptions – and unfortunately these aren’t automatically half the amount that couples pay. It’s similar when it comes to pension savings too. Couples can pool their finances for retirement, and as our analysis shows, single pensioners need to amass a significantly bigger pension pot to achieve the same standard of living as pensioner couples.
“It’s therefore vital that single people start thinking about their retirement finances as early as possible. And unfortunately not all relationships last, so awareness of these figures becomes important when thinking about how to approach pension sharing and the possibility of a single retirement. Knowing the sort of lifestyle you want in retirement will help develop a plan, and the PLSA Retirement Living Standards tool outlines the savings target that you might need to achieve the retirement you desire. Saving into a pension from an early age will give your money more time to grow and benefit from any associated compound investment growth, while boosting your pension contributions is also a great way to build up savings. To help keep your pot growing more, consider making top ups to the amount you regularly pay into your pension if you get a pay rise for example, or make a one-off contribution following a bonus.
“The unfavourable economic environment of the past few of years has significantly impacted the pension savings required to meet even the minimum of standards in retirement, as seen when we look to last year’s analysis. The updated PLSA retirement standards for 2024 mean single pensioners now need £25,000 more in pension savings than in previous years to achieve a minimum level retirement, £240,000 to achieve a moderate standard and £215,000 more to achieve a comfortable level of retirement.”
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