The most crucial information in this chapter is what you will earn in retirement, how well it will compare to what you make now, and any potential essential outgoings.
You can determine if you’re saving enough for retirement by looking at the most recent UK statistics.
The Pensions and Lifetime Savings Association (PLSA) introduced the Retired Living Guidelines to assist individuals in envisioning the type of lifestyle they could have in the future.
77% of pension savers still determine how much money they will require in retirement.
Understanding one’s monthly outgoings are crucial because everyone’s circumstances are unique.
In this article, we shall help you plan your retirement better by providing all the important information. So, keep reading!
Table of Contents
The Average Retirement Income Of UK Citizens
According to the most recent official statistics, the typical pensioner’s weekly income in the UK is £304, or £15,080 net annually.
Yet, this sum might change based on a person’s location, circumstances, and income. In addition to their pensions, many retirees rely on public aid to cover their bills.
Depending on the area where a person lives, the cost of living may also change.
The disparity in housing and living expenses between London and other places is a major factor in the retirement income gap.
Private pensions accounted for 67% of retiree income in 2017–18, while state pension payments, workplace pension plans, and investments are also significant sources of income.
Those living in Scotland or the North East typically have larger average sums to spend than those living elsewhere.
The average salary uk earned by private pensions may vary depending on geography.
Living Standards Of Retired Citizens
Three retirement living criteria have been proposed by the PLSA based on Loughborough University research.
These guidelines offer advice on the amount of money people should strive to have saved by the time they reach retirement age in order to maintain a minimal, moderate, or comfortable quality of living.
Here are the different kinds of lifestyles you might choose—
- Minimal- You have enough money to fulfil your basic requirements and enough extra for luxuries.
- Moderate- You have greater financial stability and freedom than being at the minimal threshold.
- Comfortable- Having more financial independence and the ability to buy some indulgences makes you more at ease.
One example of a benchmark used by government organizations to assess changes in the cost of living is the Consumer Price Index (CPI).
The price of “baskets” of goods and services, such as food, housing, transportation, and healthcare, are included in these benchmarks.
They include examples of the probable expenditures associated with house upkeep, food and drink, transportation, vacations and leisure time, apparel, and charitable giving.
They also offer comparisons between various countries’ regions. By applying these principles, individuals or families can estimate their costs and decide on their financial planning.
How Much Will You Need
According to the kind of lifestyle you choose, we have presented the figures you might need to lead your retirement days—
Minimal Lifestyle
An annual retirement income of £12,800 for a single individual and £19,900 for a pair is required to maintain a minimal quality of living.
This sum is computed assuming the borrower has no debt and owns their house.
A higher retirement income would be necessary for people with unpaid bills or rent to keep their living level above the poverty line.
When fundamental requirements are met, some money is still available for enjoyment.
This basic living level shows a thrifty way of life yet leaves little room for luxury.
Couples may need to set spending limits and choose budget-friendly pastimes, but this does not cover the costs of buying and maintaining a car.
Moderate Lifestyle
A single individual would need £23,300 per year, while a pair would need £34,000 to maintain a reasonable living level.
This is based on typical prices for necessities like food, housing, energy, transportation, and luxuries like vacations and leisure time.
However, the cost of living can differ based on the area, a person’s lifestyle choices, and their specific circumstances.
This level may not permit considerable savings or investments, but it does permit more expensive leisure activities.
To sustain this lifestyle, individuals or couples may need to plan their spending carefully, and supporting dependents or unanticipated costs may be challenging.
Comfortable Lifestyle
A single person requires £37,300 and a pair needs £54,500 per year to maintain a good quality of life.
On lesser salaries, people or couples can maintain a reasonable level of life by using government support programs or budgeting.
The most crucial information is that various factors, including geography and lifestyle choices, can influence what is considered a comfortable living standard.
Also, a larger income only sometimes translates into pleasure or contentment.
Therefore, it’s critical to consider personal values and aspirations while determining one’s ideal quality of living.
Make A Strong Retirement Plan
To have a decent retirement, the PLSA advises pensioners to accumulate a pension portfolio of at least £590,000.
After a lifetime of saving, the average amount in pension pots is £55,9001, and many retirees may be surprised to hear how little income their investments will offer.
The current minimum contribution levels are insufficient to move ordinary savers from a minimal to a reasonable quality of living.
Based on how much you’re saving, a financial advisor can estimate what your retirement income will be.
