With apologies to The Who and their classic sixties song, the need to think deeply about—and perhaps even achieve—retirement early in life has a new urgency. As if the Cost-of-Living crisis were not enough, along comes a report from yet another specialist lobby group you may never have heard of: the Pensions and Lifetime Savings Association (PLSA). Their report puts the yearly price of a retirement income deemed “moderate” for a single person at £31,300 for this year. The sum is £8,000 greater than the £23,300 estimate made last year. 

A “moderate” level of retirement is when retirees can afford running a car, dining out foreign holidays and ability to help family members with a budget of £1,000.

These growing retiree expectations of their quality of life in retirement is only partly responsible for the 34% jump in finance required. Having such disposable income above and beyond bare essentials such as food and shelter is now common currency.

The report judged that, even for a “minimum” retirement standard, a single person would need to put away £14,400 annually. This is £1,600 more than the £12,800 advice in the previous year. Even this 11% increase is double current wage inflation.

The bulk of the increase in requirement comes not from rise in expectation but from rising food inflation and energy bills that remain high.

“The increase in the annual rate was largely the result of the increase in food prices and tobacco duty“

—Office of National Statistics (ONS)

“800,000 people went more than 24 hours without gas or electricity in 2023 because they could not afford top-ups.”

—Citizens Advice Bureau

Costs also rose for those wishing a “comfortable” level of retirement, but less steeply. Research had shown that a couple would need only one small second-hand car, rather than two cars, as had been assumed in previous years.

The retirement living standards are calculated by the Centre for Research in Social Policy (CRSP) at Loughborough University, on behalf of the PLSA. The Covid pandemic is the largest factor in greatly increased socialising expenditure in pension age.

“Following the COVID pandemic, this latest research highlights a pronounced need and enthusiasm among the public for shared experiences beyond the confines of their homes, including activities like eating out and holidays,”

—Professor Matt Padley, Co-director, CRSP

The UK pension “triple lock” guarantees annual rises in state pension based on the larger of wage increase, inflation, or 2.5%. Last year, the increase was 10.1% and from April 2024, it will rise by a further 8.5%.

Though this cumulative increase of almost 20% may make a good basis on which to build a retirement, it still does not keep pace with the 34% “moderate” increment described above. Many baby boomers have done well into retirement, having benefitted from generous, plentiful jobs and steady rises in property values during their careers. But this does not apply to millennials and later generations.

Those looking to retire with a “comfortable” living standard, beyond 2050 will need to put aside £59,000 each year for a couple to achieve that. This is an increase of 9.2% from the £54,500 advised last year, and still greater than the “generous” triple-lock increment. Many feel such demands are unrealistic

“The triple lock added an extra £11bn a year to public spending.”

—Institute for Fiscal Studies

“Reforming the costly triple lock uprating of state pensions would help, by indexing pensions to an average of CPI and wage inflation, and by providing direct transfers to poor pensioners to mitigate poverty risks.”

—OECD

Is ANY of this sustainable? The recent publication of the state pension age and demographic change report saying the UK state pension age will have to rise to 71 for middle aged workers. 

#1096—622 words