Most of us daydream about retirement but don't do the maths. Pensions UK's research shows three quarters of savers don't know how much they'll need to spend, and that's where the Retirement Living Standards come in. They show what different retirement lifestyles actually cost, so you can figure out what income target makes sense for you.
How much you can expect to spend in retirement
The Retirement Living Standards give savers a useful rule of thumb so once you know how much you can expect to spend, you can figure out how much income you need at retirement and set a realistic savings target.
It's worth bearing in mind that they assume you own your home outright when you retire. If you're renting or paying a mortgage instead at retirement, your costs would be higher.
| Minimum | Moderate | Comfortable |
|---|---|---|
| Covers your basic needs with a little left over for some leisure / social activities | More financial security and flexibility, including a holiday abroad / longer holidays and regular meals out and social activities | Greater financial freedom and more choice, with extra leisure / social activities and some room for luxuries |
Single person
| Minimum | Moderate | Comfortable |
|---|---|---|
| £13,900 | £32,700 | £45,400 |
| Per year | Per year | Per year |
Two-person household
| Minimum | Moderate | Comfortable |
|---|---|---|
| £22,500 | £45,400 | £62,700 |
| Per year | Per year | Per year |
Pensions UK has also put together a short video introducing the three levels. It's worth a watch.
Now you can work out your income
Knowing how much you're likely to spend is only half the story. You also need to understand your projected pension income, factor in other assets, and see how changes (like working longer or saving more) change what you'll have at retirement.
If you're aged 40+, start with Destination Retirement. It pulls all your pensions and savings together so you can see the full financial picture.
Then log in to OneView to check your latest Annual Statement and compare your projected income against what different lifestyles cost.
OneView's modelling tools let you test scenarios: retire later, save more, or use other assets. And don't forget to factor in other sources of income you might have in retirement:
State Pension
Check your personal forecast on GOV.UK to see how much you're on track to receive.
Other savings and investments
ISAs, property, previous workplace pensions and other assets all count. Keep these under regular review to make sure they still suit your plans.
Lost pensions
If you've lost track of old workplace schemes, the Find pension contact details tool on GOV.UK can help you trace them.
Having a goal in mind is a great first step
If there's a gap between where you are and where you want to be, explore what's possible for you. Could you retire a year later? Save a bit more when it feels affordable? Use other assets? Small adjustments really add up.
If you haven't already used Destination Retirement (available from age 40), it's worth the time to see how your pensions stack up.
For free guidance, Pension Wise is available from age 50. Visit MoneyHelper or call 0800 138 3944.