LV= has assessed that over a typical 17 year retirement ‘happiness’ will cost at least £225,756. The maximum state pension pays out £5,727 per year and over 300,000 60-65s have no retirement savings and face a £106,000 income gap.
Picture the scene: a detached house with a garden in a village, 21 days abroad on holiday a year, 468 hours spent on your favourite hobby and 364 hours of precious time with the grandchildren each year. They’re just some of the essential ingredients required for a ‘happy’ retirement in the UK – a lifestyle that costs a not insignificant £225,756.
That’s according to new research released by from retirement specialist LV=, which paints a very clear picture of what Britons on the cusp of retirement deem necessary for a contented life after work.
After conducting a survey of 1,070 adults aged 60-65 years, researchers from LV= set about compiling the definitive ‘blueprint’ for a happy retirement, drawing in the ideal property to holidays abroad, family time and everything in between.
The Essential Ingredients Of A Happy Retirement (costs per person):
To spend an average of £752 on holidays abroad each year
To spend at least 364 hours per year with children and grandchildren and £249 on gifts for them
To spend 312 hours and £1,716 per year socialising with friends
To spend 468 hours and £480 per year indulging their hobbies
To retire at the age of 65
To live in a detached house with a garden
To live in a village
Have good transport links and be within walking distance of local amenities
To live no more than 24 miles away from their children and grandchildren
Assuming they don’t need additional capital to move to their ideal retirement location, when coupled with the typical £7,623 essential annual living costs of a retired person in Britain today, the total cost of the contented retirement comes in at £10,820 per year. That’s £225,756in total over the course of an average 17-year retirement.
Although this may seem like a fairly ordinary standard of living, 8% of 60 to 65s admit they have no form of pension or retirement funds in place whatsoever. This means that an estimated 315,200 people will be relying on nothing but the state pension of £110.15 per week, or £5,727.80 a year in retirement. With a happy retirement costing at least £10,820 per year or£208.08 per week, this group of people will find themselves falling short in their pursuit of happiness by £5,092 in their first year and £106,243 over the course of their retirement.
Of those 60-65s who do have a pension, over a quarter (27 per cent) don’t know the value of their current pension pot. Industry figures show that a third (29.7%) of people have a pension pot of less than £10,000. However, given that half (49%) of those who are still to retire haven’t sought any form of financial advice, the true shortfall in their pension will not become apparent until they are ready to retire.
Commenting on the findings, Vanessa Owen, LV= Head of Annuities and Equity Release, said: “It’s clear from the research that Britain has fairly modest aspirations when it comes to what they feel they need for a happy retirement. And indeed many of the features of a happy retirement, such as time with family and friends, cost no money at all.”
“However, one cannot shy away from the fact that achieving contentment in retirement, as with any lifestyle, does come with a price tag; over two hundred thousand pounds according to the research. It’s never too late to make a difference, but it’s important that people plan for the retirement as soon as possible and also explore all of the options available to them as retirement approaches, so they can maximise their income once their working lives come to an end.”
Indeed while the blueprint lists the basic costs and features required for a happy retirement, there are many among the over 60s who feel they need far more than what the blueprint offers to achieve contentment in retirement. One in three (33%) would not be contented unless they holidayed for over a month every year, and a further a third (37%) admitting they could not achieve happiness in retirement unless they were able to spend over £1,000. In fact, only 5% of all 60 – 65s would be happy in retirement without any holidays.
When it comes to socialising, 6% are planning a very frugal retirement and do not intend on spending any money, at the other end of the spectrum, 8% believe they would need to spend over £4,500 per year[8] wining and dining with friends to achieve happiness.
Vanessa Owen, LV= Head of Annuities and Equity Release, continued: “With people spending longer in retirement one of the challenges is looking at how they fund it. Today’s retirees now have many options available to them at the point of retirement and its important they make the best possible choice, as it will impact them for years to come. Seeking professional advice can put them on the path to a retirement where they have both the buying power and quality of life they desire.”
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