Comfortable retirement requires over £700k in new calculations

A single person must have a pension pot of £738,000 in order to achieve a comfortable retirement, Quilter has found.

The new calculations by the firm are based on the Pensions and Lifetime Savings Association’s (PLSA) research, which has just been updated to account for annual inflation, perceptions of what constitutes varying levels of retirement and the new state pension.

The research revealed how much people will now need in retirement to achieve a minimum, moderate and comfortable retirement lifestyle.

Quilter calculations show that in one year, the size of a pot needed for a comfortable retirement has grown by nearly £100,000, with a couple now needing £929,000 in joint pension wealth for them both to achieve a comfortable retirement.

Head of retirement policy at Quilter, Jon Greer, said: "The massive annual leaps in the amount needed to achieve the three levels of retirement standards don’t just reflect the impact of higher food and energy costs. Whilst such changes have impacted those on a moderate and lower expenditure level to a greater extent, the latest update reflects some key changes to the composition and expectations on what should be included from income.

"For those seeking a moderate level there is a greater importance on helping their family members financially – no doubt partly driven by cost-of-living crisis. In addition, there appears a greater appetite for activities outside of the home like eating out and holidays compared to the pre-COVID era."

In January last year, using the PLSA’s previous set of figures, Quilter calculated that a pot of £645,000 was needed for a comfortable retirement. This change is partly down to inflation and also to changes in the composition of the basket of goods used for the index.

Now, a comfortable retirement requires a single person to have an annual income of £39,387 per year on top of the state pension, which in 2024-25 is £11,500.

According to the PLSA, a comfortable retirement consists of a range of measures, including be able to go on a four-star fortnight-long holiday in the Mediterranean every year, as well as three UK long weekends, and spend up to £1,500 a year on new clothing and footwear a year.

Also, measures this year include being able to gift £1,000 a year to support family members.

However, Greer pointed out that this figure does not take into account other aspects of later life spending.

He added: "The major worry is that these figures are all based on the assumption that the pensioner does not have any housing costs on top of any lifestyle costs. According to the Pensions Policy Institute, by the year 2041 there could be up to 3.6 million households renting while in retirement, 1.9 million more than today.

"Future generations that have not been able to secure a home and are renting in retirement or perhaps are still paying off marathon mortgages then this is going to eat further into someone’s pension pot.

"There is also the yet to be addressed social care crisis. Many people are living longer but not necessarily in good health and getting the right care can be hugely expensive."

Share Story:

Recent Stories

Technology and the equity release market
Dan McGrath talks to chief executive officer at Air Group, Paul Glynn, about the equity release sector, changes to the market and how technology can allow the industry to move forward for lenders and consumers.

The later life lending landscape
Michael Griffiths speaks to Darren Deacon and Stuart Heavens from Family Building Society about the current state of play in the later life lending market


Subscribe to our newsletter to receive breaking news and other industry announcements by email.

  Please tick here to confirm you are happy to receive third party promotions from carefully selected partners.