Warnings Issued to Pensioners Falling Short of Rising Retirement Benchmarks

The rising cost of living has made maintaining even a basic retirement lifestyle increasingly difficult for state pensioners. According to recent figures from the Pensions and Lifetime Savings Association (PLSA), the cost of a "comfortable" retirement has jumped significantly. For single retirees, this now requires an annual income of £43,100, while couples need £59,000.

This sharp rise reflects broader financial pressures caused by inflation and economic uncertainty, leaving many retirees struggling to bridge the gap between their limited incomes and rising expenses. The state pension, which provides a maximum of £10,600 annually, falls far below these benchmarks, highlighting the challenges faced by those relying solely on this income.

The Escalating Cost of Retirement

The PLSA report outlined increases in the financial benchmarks for three retirement standards: minimum, moderate, and comfortable. These benchmarks serve as a guide for retirees to estimate the income they would need to sustain different lifestyles.

• A minimum standard of living now requires £14,400 annually for single retirees, up from £12,800 last year. This level covers basic essentials like weekly groceries, occasional dining out, and a UK holiday but does not account for owning a car.
• For a moderate standard of living, single retirees need £31,300 annually, a substantial increase of £8,000 compared to the previous year. Couples aiming for a moderate retirement need £43,100, up from £34,000. This level allows for holidays in Europe and running a small, second-hand car.
• A comfortable retirement now requires an annual income of £43,100 for singles and £59,000 for couples. This benchmark includes higher quality goods, regular holidays abroad, and more generous spending on leisure activities.

Nigel Peaple, Director of Policy and Advocacy at the PLSA, highlighted the impact of inflation on retirees: “The cost of living has put enormous pressure on household finances over the last year and, as the research shows, this is no different for retirees.”

State Pensioners at Risk

The rising costs place significant financial strain on pensioners who rely heavily on the state pension as their primary income source. The full new state pension currently pays £203.85 per week, equating to just over £10,600 annually, far below the income needed for even a moderate standard of retirement.

The PLSA stresses the importance of preparing for retirement and adapting savings strategies. Peaple added: “It’s important for workers saving for retirement to remember the standards are not prescriptive targets; they are a tool to help you engage with the type of spending you think you will do in retirement and to help you plan for it.”

For many state pensioners, however, these savings tools may not be a viable solution, leaving them to depend on additional support. This highlights the critical role of benefits like Pension Credit, which is designed to top up incomes for low-income retirees.

Expert Advice for Retirees

Experts recommend that retirees take proactive steps to secure financial stability in the face of rising costs. This includes:

1. Reviewing Eligibility for Benefits: Pension Credit and other financial support programs can provide essential assistance.
2. Adapting Savings Plans: For those still working, adjusting workplace pension contributions to account for gaps in employment or rising costs can help secure a more stable retirement.
3. Seeking Financial Guidance: Pensioners should consult with advisors or use tools provided by the PLSA to understand their options and plan accordingly.

As Peaple noted, “Working and saving is likely to vary over a lifetime, for example taking time off to have children, so it is important to adapt workplace pension contributions to make up for periods not saving.”