Latest Retirement Living Standards show change of UK public expectations | PLSA
Latest Retirement Living Standards show change of UK public expectations

Latest Retirement Living Standards show change of UK public expectations

07 February 2024

The latest update to the PLSA Retirement Living Standards (RLS) reveal a shift in the cost of retirement living driven by changes in the UK public's expectations and increases to the cost-of-living.

The latest research reflects the price rises that households have faced, particularly in food and energy use. It also highlights the increasing importance people place on spending time with family and friends out of the home, as people’s priorities have changed following the pandemic. This switch, and the associated costs are reflected in the updated levels.

Calculated by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA, the RLS describe the cost of three retirement lifestyles: Minimum, Moderate, and Comfortable. The research is based on multiple in-depth discussion groups with members of the public from all parts of the UK.

The updated Retirement Living Standards reveal increased costs across all levels, the Minimum level increased to £14,400 for a single person and to £22,400 for a couple. The Moderate level increased to £31,300 for a single person and to £43,100 for a couple. At the Comfortable level, the cost increased to £43,100 for one person and to £59,000 for a two-person household. 

Not all savers are the same, they will have their own expectations and requirements when it comes to visualising their retirement. As financial planning tools, the RLS are designed to assist individuals in identifying elements of their preferred retirement lifestyle and provide insights into associated costs. The three levels show how people considered Minimum, Moderate and Comfortable living standards. Savers can use them to judge whether their current savings levels are going to enable them to reach their desired lifestyle which may fall between the given standards.

The State Pension triple lock acts as a crucial safeguard against rising retirement living costs. With a significant 8.5% increase to just over £11,500 annually from April 2024, the State Pension remains a substantial foundation of retirement income. The State Pension triple lock, alongside improved annuity rates, will help median earners be able to achieve most aspects of the Moderate level.

Professor Matt Padley, Co-director of the Centre for Research in Social Policy at Loughborough University, said: “Expectations about living standards in retirement continue to change in subtle ways. The research sets out public consensus about these different living standards with the aim of helping people think in more concrete ways about what they want their own retirement to look like. Their personal retirement goals will be shaped by their own circumstances, needs and preferences.

“In this year’s findings we see the strong effects of rising prices in what’s needed to meet the cost of food and energy. 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.”

Nigel Peaple, Director Policy & Advocacy, PLSA, said: “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.

“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.

“It is also worth highlighting that a couple who each has a full entitlement to the State Pension will achieve the Minimum level, and if each is paid average earnings throughout their working life, they have a good chance of enjoying many aspects of the Moderate living standard. 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.

“Many pension providers now provide tools and calculators on their online platforms to allow savers to pick-and-mix elements of each Retirement Living Standard, allowing them to leave out the things they don’t see as part of their life and tailor the Standards to their individual circumstances and preferences.”

Urgent need for reform

The higher cost of living in retirement underscores the urgent need for reform of the workplace savings system.

The PLSA, in its recent report, Five Steps for Better Pensions, made several recommendations on how to increase retirement income, chief among them is a proposal to increase minimum auto enrolment contributions from 8% to 12% gradually over the next decade. Currently, employees pay 5% of earnings and employers 3%. Under our proposals, employer contributions would be increased first until they match the 5% paid in by employees. Subsequently employees should only be required to put in 1% extra, with the result that by the early 2030s each will be paying 6%, totalling 12%.


The cost of a Minimum, Moderate and Comfortable retirement

In the latest update, the cost of a Minimum Retirement Living Standard increased from £12,800 to £14,400 for a single person and from £19,900 to £22,400 for a couple. The Minimum Retirement Living Standard is the same as the Joseph Rowntree Foundation’s Minimum Income Standard (MIS) and reflects what members of the public think is required to cover a retiree’s needs, not just to survive but to live with dignity – including social and cultural participation. It includes around £95 for a couple’s weekly groceries, a week’s holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week. It does not include budget to run a car.

With it being a higher proportion of the total budget for the Minimum RLS, the higher cost of food was the largest contributor to the increase at this level.

At the Moderate Retirement Living Standard level, costs increased from £23,300 to £31,300 for a single person and from £34,000 to £43,100 for a couple. The Moderate Retirement Living Standard, in addition to the Minimum lifestyle, provides more financial security and more flexibility. For example, a couple could spend around £100 a week on groceries, £60 a week on eating out, run a small second-hand car, have a week holidaying in Europe and a long weekend break in the UK.

The Moderate level has increased more in percentage terms than either the Minimum or the Comfortable levels. Aside from higher food, household energy and motoring costs adding disproportionally to the cost, this level also saw changes in the expectations of what should be included at this level. For example, the in-depth discussion groups considered that at the Moderate level people should be able to help their family members financially with a budget of £1,000 (e.g. to assist with the cost of grandchildren activities), as well as an additional £100 per month to take family members out for a meal. This was considered particularly important in the context of the cost-of-living crisis.

At the Comfortable Retirement Living Standard, retirees can expect to have more luxuries like regular beauty treatments, theatre trips and two weeks holiday in Europe a year. A couple could spend around £130 per week on groceries and £80 a week per couple on meals out. At this level, the cost of living increased to £43,100 for one person and to £59,000 for a two-person household.

The Comfortable level also saw increases from the cost pressures on food and energy use, but the overall percentage increase was lower than at the Moderate due to adjustments the in-depth discussion groups made to expenditure in some categories. For example, the research groups determined that a couple really required just one small second-hand car (a three-year-old, five-door Ford Fiesta replaced every five years) rather than the two cars which featured in previous years (which also included a mid-range SUV).

The Retirement Living Standards are being used across the pensions and savings industry in the UK, helping savers to understand what they will need in retirement and how this compares to projected pensions income. Through the communications of more than 100 pension schemes and organisations, including some of the largest and best-known brands, the Standards are reaching up to 35 million savers.

The RLS figures quoted here are for the UK, excluding London. Costs within the capital are higher.

Visit the dedicated Retirement Living Standards website to read the full report on the 2023/24 research update.

The RLS research is made possible through the generous support of the Friends of the Retirement Living Standards.

Cali Sullivan, PR Manager

020 7601 1761 | [email protected]

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