Claire Altman, Managing Director of Individual Retirement at Standard Life: “This update to the PLSA Retirement Living Standards will provide vital guidance for those planning for their retirement in challenging circumstances, as people navigate the impact of high inflation, as well as the cost-of-living crisis.
“The current economic environment has not made it easier for people to manage their retirement savings and while flexibility is important when it comes to retirement income, there is also a demand for certainty. Research from Standard Life’s latest Retirement Voice, which surveyed almost 6,000 people across the UK, found that 78% think that ‘certainty of income’ is a priority when it comes to retirement, while two-thirds (68%) want enough guaranteed income to cover their essentials.
“Some of this certainty may well best be met by annuity income, and with rising rates, this actually benefits retirees. Not only does that make now a good time to be thinking about the value annuities can offer, these latest figures from the PLSA can also provide a benchmark for people to establish what is needed for a minimum standard of living, and how an annuity might help secure this."
Samantha Gould, Head of Campaigns at NOW: Pensions, comments: “The UK’s cost of retirement crisis is growing bigger by the day. Underpensioned groups are already at real risk of falling short of a basic quality of life in retirement. These stark figures from PLSA show the people most exposed to financial struggles in retirement are now having to bear the brunt of soaring food and energy bills. The numbers simply don’t stack up to anything like an acceptable outlook for our ageing population.
“Our own research with the Pensions Policy Institute (1) highlights that some of the UK’s most financially-at-risk groups – including divorced women, people from ethnic minority backgrounds and people with disabilities – have suffered a decade of decline in their private pension income. We estimate 8.6 million people are missing out on workplace pension savings, including nearly one in five working women.
“The current climate presents major challenges for policymakers, but there is a desperate need to take practical steps towards a pensions system that is fair for all. NOW: Pensions has put forward policy proposals (2) that would help over 3 million more people benefit from workplace pensions and boost the nation’s pension contributions by £1.2billion a year.”
Becky O’Connor, Director of Public Affairs at PensionBee said: “The cost of living crisis has pushed the bar even higher for the size of pension people need to achieve an acceptable living standard in retirement. The pot size requirement for a comfortable retirement is now £328,000 according to the PLSA, almost 10 times more than the median UK pot size of £37,600 for people age 55.
“The retirement living standards are especially helpful to those approaching the end of working life, however they set a benchmark for living standards in retirement now, not for what today’s younger workers will need in the future, after decades more inflation, which remains difficult to gauge.
“Although people should be able to factor in receiving a rising State Pension, the ‘Triple Lock’ guarantee feels constantly under threat and the age at which people become entitled to the State Pension is on the rise, so this may be a less reliable form of income in retirement as time goes on.
“There are also a number of significant potential costs that these living standards don’t take into account, but if they arise, could have an impact on living standards. For example, the growing number of older people living in privately rented accommodation is a looming threat to retirement for those who will still be paying housing costs when they stop work. Many older people also wish to gift money to adult children or grandchildren. There is also the possible cost of care to factor in.
“The silver lining of rising interest rates is higher annuities, so at least those planning to take one in retirement can look forward to a somewhat higher, relatively stable income when they stop work. Others will continue to prefer to take the option of potentially higher capital gains from leaving their pensions in the stock market to boost retirement income.
“Plenty of people will take heart from these figures, which show you don’t have to be a millionaire in retirement to enjoy a decent standard of living. On the other hand, many will wince at the idea of trying to build a £328,000 pension pot to achieve it. For all, these figures offer a useful indicator of what to aim for.”
|
